Financial Planning for a New Baby
Bundles of joy cost baskets of cash. That’s why we’re here to help you prepare financially with tips on budgeting, insurance, saving and more.
We are here with you every step of the way. Contact us for support in understanding the best savings accounts for new families, life insurance options or financially planning.
Diapers and car seats and college – oh my! Your precious bundle of joy also comes with a hefty price tag, and most parents vastly underestimate the financial commitment. While anticipating the arrival of your new baby, it’s important to understand and financially plan for this exciting and important life stage. The secret is preparing before he or she arrives.
MYTH: A consumer website survey found that 54% of all couples thought baby expenses would be under $5,000 in their child’s first year.
REALITY: The federal government puts the cost of raising a child at $233,000, counting all expenses through age 18. About $13,000 a year is a big hill to climb for most people.
Whether you are expecting or trying, take this advice
- Start Cutting Back: No matter how much you currently earn, you’re going to have less to spend on yourself when the baby arrives. Well before the due date, get frugal with luxuries like restaurant meals, shopping and vacations.
- Start a Budget: If one parent is going to take time off after the birth, it’s good to “practice” living on one income.
- Reduce Your Debt: If you are in debt, it’s smart to chip away at it before baby comes. All that money spent on interest charges is soon going to be needed for diapers and doctor visits. One idea is to transfer your credit card balance to a card with a lower rate.
- Open An Account: Even before your son or daughter is born, you should establish a special savings account specifically devoted to baby expenses. Worst case, you’ll have something to fall back on when you encounter unexpected costs, and best case, it’s a jump on education savings.
- Check Your Insurance Coverage: Contact your insurer and ask about coverage for pre-natal tests, hospital stay deductibles, and breast-feeding support services. It’s also smart to open a health savings account that offers tax benefits and provides a cushion for unexpected costs.
- Pick A Pediatrician: Obviously, you should choose a doctor you are comfortable with. But also make sure their practice is part of your insurance network, so you don’t end up with extra high co-pays for baby check-ups.
- Plan Childcare: If you will be using a daycare, do your research to compare the costs of a nanny versus a daycare center versus a home daycare. Costs vary dramatically so it’s important to know what will work best for your family.
Baby is here!
- Life Insurance: If you don’t have a life insurance policy, you should get one. If you do have a policy, consider increasing the amount – especially if your policy is what your employer offers as standard. After all, if something happens to you, you’ll want to ensure there are sufficient financial resources available to raise your child.
- New Savings Accounts: Once your child has a Social Security Number you can set up a savings account in his or her name. It’s the perfect place for birthday and holiday gifts from family members.
- College Saving: Private college costs are already topping $50,000 a year. It’s never too early to open an Education Savings Account or to set up a 529 Plan.
All of this planning pays off because the old cliché is true: it all goes by faster than you think it will. Make sure you take the time to savor every moment with your new little person and plan for their secure financial future.
Sources IRS.gov, USDA.gov