Becoming parents is an experience that is wonderful … and costly. That’s why financial preparation is very important for new parents.
To financially plan for a new baby, parents should consider a few things. Take advantage of the nine months of pregnancy that gives parents time to figure out how to handle having another mouth to feed.
First, consider how you will manage on the reduced income caused by time off for the pregnancy and birth
- Your employer may be required to grant you time off under the Family Medical Leave Act (FMLA), but not required to pay you during that time.
- Calculate how much income will be lost during maternity leave and adjust your budget to cover the future shortfall.
Figure out medical costs and know what to expect from medical insurance coverage
- Consider deductibles and co-pays.
- If you can participate in an employer-sponsored flexible spending account, consider putting money into it to cover unreimbursed medical costs.
Plan for childcare expenses
- Research childcare options in advance of the birth of your child in order to find one you trust and can afford.
- Explore flexible work scheduling or telecommuting to work as a childcare budget saver.
Start a baby budget
- Divide your family income into everyday income to cover household expenses and “baby” income to cover baby-related expenses.
- Baby-related costs include initial costs (crib, baby carriage, car seat, clothes, diapers, bedding, and bath items), and ongoing baby expenses (diapers, wipes, clothes, formula, and baby shampoo).
Invest in the future
- Start saving money for your child’s college education as soon as they are born. Options include a 529 College Savings Plan or Coverdell Education Savings Account.
- Don’t put college savings ahead of your own retirement needs. Start or keep contributing to your retirement savings plans.
Author: Darice Britt