Having a baby is certainly a life-changing experience! Not only are you expanding your family with a new addition, but you'll also be adjusting to a new lifestyle and schedule as well as changes in your finances. Yes, having a baby can cost a lot of money, and preparing for a baby financially takes good planning. With the right steps, you can ensure that you are able to save for your baby, cover their needs and still meet your financial goals.
Let’s talk through some of the things you can do to make sure you stay on top of your finances as you begin planning for a baby financially.
1. Adjust your current budget to accommodate your new baby
Additionally, once your baby arrives and you are all settled in and have adjusted to life with a baby, you can also explore how you or your significant other can earn more money. You can do this by finding a better-paying job, finding a part-time job, or starting a side hustle.
Preparing for a baby by cutting back on your expenses and increasing your income will help to make more money available for a little one. It will also help you with staying on top of your financial goals.
2. Start saving for immediate expenses
Babies come with a lot of expenses, including immediate ones and longer-term ones. Although you will get a lot of what you need for your baby's first year or two at your baby shower, you'll still need to have money available to fill in the gaps for what your child will need.
Things like diapers, formula, daycare, nanny services, etc., can all cost a pretty penny. You certainly want to make sure you build these expenses into your budget and begin saving for them. Check out our key tips to help you craft your own baby budget!
3. Consider living on one income
If you are in a dual-income household and one of your goals is to stay home with your baby after your maternity leave ends, you definitely want to start making preparations by learning how to live on one income.
While you are still earning an income and before your baby arrives, you can readjust your living expenses. Figure out how to make things work financially on one income while saving the other income.
Preparing for a baby by living on one income will also give you the opportunity to ramp up your savings before you stop working.
Not everyone is able to survive on one income. Some moms may keep working while on maternity leave. It's all about planning ahead to you can do what works best for you.
4. Start saving for long-term expenses as your baby grows
To ensure you are able to stay on top of your goals with a baby arriving, it's important that you create a plan for your finances and start putting money aside as quickly as possible, not only for the expenses of a new baby but also for the long-term expenses that will come up as your child gets older.
Some expenses could include school activities, music lessons, daycare fees, babysitting costs, etc. The last thing you want to do is take on debt to meet your child's needs.
You can also consider setting up college savings for your child as well through a 529b (or other college savings options) and build the contributions for this account into your budget as well. This would be a great gift to your child and will help them avoid or minimize taking on student loan debt.
Having children might mean that you may have to save less in order to cover their needs, but it's all about being mindful of your expenses and being creative whenever you can to limit how much you are spending overall.
It's also important to keep your long-term financial goals in mind too as you make plans around your child. This way, you can still make progress toward your money goals while at the same time being able to cover your child's expenses.
5. Review your maternity leave and insurance coverage
It’s important to understand your maternity leave details so you can prepare your finances while you are out of work. How long is your leave and how much of your salary will you be paid?
If your leave is covered at 100% great; otherwise, if it’s less you can plan to put some extra funds aside to fill in the gap and even try to live on a reduced amount so you get used to it beforehand.
You also want to check in on your health insurance coverage. How much will be covered for a vaginal vs. c-section delivery as well as your hospital stay? You need to know what costs to expect when preparing for a baby!
6. Don’t go baby shopping till after your baby shower
It’s easy to get tempted to hit the shops and buy all those cute little baby things in preparation for your new arrival as a first time mom. But if you can, wait until after your baby shower to go shopping. Why? Because you’ll most likely get a lot of what you need at your shower, and you can put the money you would have otherwise spent toward your goals.
The key to getting what you need is registering the right way, so be sure to look up online guides and ask other moms. Think of including things like diapers in different sizes, wipes, a stroller, a bouncer, etc. After your shower is over, you can then go out and purchase the things you didn’t get!
7. Update your life insurance policy
Part of preparing for a baby financially is updating your life insurance policy. Now that you have a little one to think about, it's best to add them as a beneficiary to your policy.
Life insurance is vital to your child's financial well-being if something were to happen to you. It can cover their education expenses and provide supplemental income too.
You want to ensure you have sufficient coverage for your family's financial needs. Speak with a licensed agent about the different policy options to help you find the policy that best suits your situation.
8. Create or adjust your estate plan
It's a sensitive subject to some, but having an estate plan is essential for your finances and preparing for a baby. Having your estate plan in place ensures your assets are designated to your chosen beneficiaries accordingly.
If you have already created an estate plan, then you need to adjust it to reflect what your financial wishes are for your new baby. You will need to revisit your estate plan if you have additional children.
9. Become a savvy shopper
Planning for a baby financially means you need to become a savvy shopper. You can save money shopping if you do it right! For example, babies grow fast, and buying clothes secondhand can save you a bundle of money.
Leverage these tips to help you with preparing for a baby!
Planning for a baby financially will set you and your child up for financial success. Start learning how to manage your money properly sooner than later. Make a financial plan, and budget, and get properly insured to prevent money setbacks.
Whether you are preparing for baby one, two, or three, it's always critical to review your financial situation before the baby arrives.
Remember, everyone's financial needs are different. Ensure you always pick the right budgeting method that works best for you and your family.