It is time to estimate medical expenses, plan time off from work, and budget for the new arrival. Preparing for a baby entails more than just tiny clothes and heartwarming ultrasound photos; it also necessitates extensive financial planning. This guide will outline the most important financial tasks on your plate from pregnancy to the first years of your child's life, including:
- Calculating your medical expenses
- You intend to take a leave of absence from your job.
- Making plans for the new arrival.
Preparation for delivery
- Understand your health insurance and budget accordingly. Even if you have health insurance, having a baby is expensive. Early in the pregnancy, estimating your expected costs would help. NerdWallet's guide to understanding medical bills can assist you as you navigate prenatal care, labor and delivery, and the bills that will inevitably follow.
- Make arrangements for maternity/paternity leave. The amount of time you and your partner (if you have one) have off work and whether or not you are paid during that time can significantly impact your household finances in the coming year. Understand your company's policies and the laws of your state to get a clear picture of how your maternity leave will affect your bottom line.
- Create a pre-baby budget. Adjust your budget once you know how much you'll be spending on out-of-pocket medical expenses, how your income will be impacted in the coming months, and have prepared a shopping list for your new addition. To keep spending under control, set a limit on necessary and optional purchases (such as that designer diaper bag or high-end stroller with the LCD control panel), and consider buying used.
- Create a post-delivery budget. Recurring expenses like diapers, child care, and extra food will alter your household budget for years. Plan ahead of time to avoid being caught off guard.
- Select a pediatrician from your insurance company's network. Your baby's first doctor appointment will be within the first week of life, so you'll want to choose a doctor ahead of time. Before making a decision, consult with friends and family for recommendations, and call around local clinics to request an interview with a pediatrician. When looking for the right doctor, remember to double-check that they are in your insurance network. Ask the clinic, but double-check with your insurance company to avoid unexpected out-of-network charges.
- Create or replenish your emergency fund. If you don't already have a "rainy day fund," now is the time to start one. Kids are prone to accidents, and with the cost of raising a child, you never know if you'll have enough money to cover any unexpected expenses. A savings account with three to six months' worth of living expenses is an excellent place to start.
- While in the hospital, your main priority is having a healthy baby. However, there are a few loose ends that must be addressed.
- Obtain a birth certificate as well as a Social Security card. Hospital personnel should assist you in obtaining your new child's Social Security number and birth certificate. If they don't, or if you give birth at home, contact your state's vital records office for a birth certificate and your local Social Security office for a Social Security card.
Within the first 30 days of a baby's life
- Include your child on your health insurance policy. In most cases, you have 30 days from birth to add your child to an existing health insurance policy. You have 60 days in some employer-based plans. Regardless, do it as soon as possible because you don't want to be caught with a sick baby and no insurance.
- Consider purchasing a life insurance policy for your child. Because no one expects the tragedy of losing a child, many parents do not prepare for it. The rates are typically low because a child's life insurance policy is only used to cover funeral expenses. When covering children, the most popular option is a "term" policy that lasts until they are self-sufficient.
- Begin thinking about child care. It can take weeks to find the proper daycare or nanny. Begin as soon as your maternity leave is over. You'll need time to visit daycare centers, interview nannies, and complete any necessary applications and approvals.
After the first monthYou'll be in this parenting role for a long time, so planning ahead of time is essential. Estate planning is integral to providing for your children but isn't the only crucial, forward-thinking task to complete.
- Modify your beneficiaries. If you already have life insurance for yourself or the primary breadwinner in your household — and you should — you may want to add your child as a beneficiary. The same is true for your 401(k) and IRA accounts. However, remember that you'll need to make other changes to ensure your child has access to the money when and how they need it. We can accomplish this through will and trust.
- Disability insurance is a necessity. Disability insurance is far more likely to be required than life insurance. Make sure you have enough coverage to cover your expenses if you cannot work for several months. Remember that your monthly living expenses have increased due to the new addition.
- Draft or revise your will. Although your will is only one component of estate planning, it is an excellent place to start. Tragic events occur, and you want to ensure that your child is cared for if one or both parents die. Make a guardian appointment, so the courts do not have to.
- Continue to save for retirement. Maintain your retirement plans, so your child does not have to support you in your old age. When a child is born, it's easy to lose sight of your personal goals and long-term plans in the face of this enormous responsibility.
- Put money aside for their education. College is expensive, but you can make it more affordable by beginning to save early.
- Adding a new family member comes with many new responsibilities, so don't try to tackle them all at once. Prioritize your financial tasks and start with the most important ones. Begin with medical bills and insurance claims because they will be among the first financial obligations you will face while expecting. Proceed to budget for your pregnancy and the first few months of your child's life.
- With 18 or more years before your child leaves home, time appears to be on your side. But, as they say, blink, and he's grown. Now is the time to begin taking the steps necessary to position your family for financial success.