There are few experiences in a couple’s life more exciting than welcoming a baby into the world. Children provide a wonderful new light in your life. They help round out your feelings of purpose and meaning. It can bring you and your spouse closer together.
They’re also really, really expensive — much more expensive, in fact, than many expectant parents realize. A recent study found that 54% of parents-to-be believe that the first year of their child’s life will only cost them around $5,000. The actual price tag attached to your bundle of joy could be four times that!1
The same study also found that 57% of parents regretted not taking more financial action during the first year of their baby’s life. Working through this simple checklist with your spouse will minimize your own regrets, assist your budgeting, and help you both sleep a little better… that is, when the baby lets you.
1. Plan for caregiving.
The first step in adjusting your budget is to figure out how caring for the baby will affect your baseline household income. Check how much paid time off employers provide for you and your spouse. Depending on where you live and your income level, there might be some state laws that can benefit you.
You’ll also need to plan for what happens once maternity and paternity leave end. Will both of you continue to work? Do you have friends and family close by who will watch the baby during the day? Will you be paying for daycare?
2. Anticipate health care costs.
It’s critical that you make sure your preferred doctor is covered by your insurance. It’s important to go a step further and estimate how much prenatal care, labor and delivery, and any specialists you might need will cost. Some doctors will provide estimates. Otherwise you might have to call up your insurer to check your specific level of coverage. You should also find out how much adding your child to your insurance plan is going to increase your monthly premium.
3. Budget for the essentials.
Even the most generous baby shower and over-excited grandparents won’t cover everything your baby will need. Budgeting for big ticket items like a good crib is important. Be aware that your weekly grocery bills will be going up too — for good. Today’s diapers, wipes, and formula will turn in to tomorrow’s first foods and toddler clothes before you know it. Do some comparison shopping and look for good bulk deals at both online and offline big box retailers.
4. Start ramping up your savings.
The earlier you start planning for long-term expenses like a college or savings account for your baby, the better. At the bare minimum, bulk up your emergency savings account. If you don’t have one, take another look at the above items and think about how they’re going to impact your normal disposable income. There’s a whole other person you need to think about now in the event of an emergency.
5. Prepare important estate documents.
Once your baby is born, order some extra copies of the birth certificate to file away with the Social Security card. You and your spouse should update your wills, trusts, insurance policies, and investment accounts to include your child as a beneficiary. If you don’t have a will or life insurance, put those together immediately!
6. Don’t lose sight of your retirement goals.
It’s easy for new parents to get so wrapped up in their babies that they neglect their normal saving, investment, and retirement strategies. Unless you’re counting on this little person who can’t even roll over yet to take care of you in your old age, that’s a big mistake. Don’t turn off those automatic contributions to your savings and investment accounts.
Personal finance takes on a new meaning when you add a child to your family. Don’t try to tackle all your new responsibilities at once. Plan carefully. Once they’re old enough, you can even make finances a family affair.
Your life will be full of new experiences and changes. Enjoy every moment knowing you have set your family up for financial success.