Expecting a new bundle of joy? Talking to adoption agencies? Or have you just started discussing a family with your spouse? Wherever you are on the journey to parenthood, preparing your finances is just as important as preparing your heart for your new addition. Here are some tips to help get you ready for your new little one’s arrival.
1. Check your budget.
Are you staying within your household budget? If you don’t have a budget, start making one. You’ll need to know where all your money goes now before you can plan for the future. If you find that your spending exceeds your income, work on cutting expenses to create some margin for yourself.
Are both you and your spouse currently working? If you are, you may want to think about how well you’d be able to manage on one income. Even if you’re both planning to work after your child arrives, those plans may change later.
2. Build your savings.
Kids are expensive. In 2015, parents could expect to spend almost a quarter of a million dollars to raise a child—and that doesn’t count college costs. Especially if one of you is planning to stay home once your child arrives, you’ll need a healthy savings account, as well as a separate emergency fund to cover any unforeseen expenses.
Of course, it’s never too early to start saving for college. College costs grow every year, and putting money aside now can help prevent big loan bills later. Asking for gifts of deposits to your child’s college fund instead of toys in the early years can really pay off once your child is ready to graduate.
3. Check your coverage.
If your new little one is arriving in the traditional way, you’ll want to find out how much of the medical costs your health insurance will cover. Costs for prenatal care, delivery, and visits to the pediatrician can add up fast. You’ll need to know your insurance plan’s deductible, co-pay costs, and out-of-pocket maximum.
If you’re adopting, you’ll want to learn about the associated costs. Fees will differ whether you work with private agencies or adopt from foster care. Whichever method you choose, you’ll need to plan ahead to cover the expenses.
It’s a good idea to have life insurance for you and your spouse. Life insurance will help protect the family in case of an unexpected passing, and can help insure a good financial future for those you love.
Find out about your employer’s parental leave policy. Some employers also have post-adoption benefits, so you’ll want to check with your employer’s Human Resources department.
4. Watch your spending.
As tempting as it is to buy every adorable baby item you see, you’ll want to watch your spending. Many baby gadgets and outfits just aren’t practical and can be quite expensive. Some things you’ll have to buy new, like a car seat, diapers, and baby bottles. But ask around your circle of family and friends to see if you can borrow or buy used baby clothes, portable swing, crib, stroller, and other baby essentials. And be sure to ask more experienced parents what things new parents really use. You might be surprised to find you don’t need as many things as you thought you did!
It’s also a good idea to scale down your everyday expenses. Entertain at home rather than dining out; enjoy day trips rather than longer outings. You’ll find that the simpler life can also be much cheaper (and much easier to maintain once your child arrives.)
5. Work together.
Most importantly, you and your spouse need to work together as a team. Before you bring your new child home, you’ll want to have some important discussions. Talk about whether one of you will be staying home to care for your child. If not, you’ll need to talk about the costs of childcare. Talk about where you can make changes in your current lifestyle to accommodate your new arrival. And remember that every good financial plan needs to be flexible.
If you have any questions about how to plan for your family’s financial future, we can help. Download our free eBook , “The No-Nonsense Guide to Managing Your Money,” for more practical hints on everyday money management.
This article should not be considered legal, tax, or financial advice. You may wish to consult a tax or financial advisor about your individual financial situation.