Preparing for a baby takes a lot of work and energy — both spent on practical matters and things just for fun. It’s easy to get lost thinking about what colors to paint the nursery, how you’re going to afford to buy everything your baby might need, and trying to brainstorm the perfect list of names.
And of course, there’s the financial changes that come with a growing family. There’s no avoiding the fact that kids cost money — but that doesn’t have to be something new parents panic over.
Whether you’re expecting right now or planning for the future, you can start financially preparing for children. Use these 7 ideas to get you started.
Establish a Baby Savings Fund
Even though you may have a separate emergency fund established, you should consider saving up extra in light of your new addition.
What if your car were to break down, or your roof were to have a leak — along with unexpected expenses for your child? Your emergency fund could get depleted quickly.
It’s a good idea to save extra once you have someone who depends on you and the care you provide. You don’t want to have to worry about whether or not you can afford to fix, replace, or purchase something you didn’t plan on during a time that’s supposed to be happy and positive for your household.
Adjust Your Budget
With any major life change, you should rebalance your budget. Adding a new family member to the mix is going to increase your expenses, so you’ll need to account for them.
Diapers, formula, daycare, furniture, and clothing are going to be new expenses for you. Write down a list of what you need and what you’ll likely want and estimate how much these new line items will cost.
It’s important to do this as soon as possible. You might need to cut back in other areas, and that will be easier to do now before you have your hands full with the new addition to the family.
Figure Out Your Income
Will the amount of money you have coming in change once baby is here? Has one of you decided to become a stay at home parent, or will you be taking additional unpaid time off?
Nail down how much you’ll have coming in during and a few months before your baby is born, and don’t forget to check your projected budget against this number.
Also, it’s extremely important you review your employer’s policy on maternity and paternity leave as they all differ. This can greatly influence how much you’ll need to save up.
Knowing how much you have to live off of goes hand in hand with adjusting your budget. If your salary is decreasing, you’ll need to learn to live on less. Saving becomes even more important.
Review Your Spending
If your income and expenses are changing drastically, and you’re finding that money is tight, you might want to think about cutting back on some luxury expenses. These include things like going out to eat, beauty appointments that occur every month, and buying clothes and accessories.
You can also look at cutting cable, exchanging a pricey gym membership for a cheaper one at a smaller organization, or calling service providers to negotiate cheaper rates.
Put the extra money you “find” in your budget toward your list of baby necessities or savings.
Keep Your Baby Purchases in Check
The “fact” that children will cost $245,000 to raise gets thrown around a lot. Children do cost more money, but the total cost is within your control. Children cost as much as you spend on them.
You don’t have to go overboard when buying things for your kids, especially when they’re newborns.
Focus on getting things second-hand, whether they’re hand-me-downs or from garage sales. Babies grow fast! It’s not worth the money you’ll spend to buy them, say, brand new clothing when they’ll grow out of it in a few months.
Review Your Health Insurance Coverage
You’re going to be incurring a decent amount of medical costs throughout a pregnancy if you’re not covered appropriately under your insurance.
Review your health insurance plan and see what it covers, and what it doesn’t. If your spouse has access to another plan through work, check to see if their coverage is better.
This will be helpful when figuring out how much you need to have in your baby savings fund.
Consider Life Insurance and Estate Planning
Do you and your spouse have adequate life insurance coverage? This is an important factor to consider when bringing a child into the world. Life insurance is a necessity when you have others depending on you.
Something happening to you or your spouse means loss of income and loss of help with childcare. Both are equally important. Life insurance will allow your financial situation to remain stable throughout rough times.
Additionally, consider estate planning — yes, even if you’re younger. This will ensure your children are taken care of according to your wishes should something happen.
Otherwise, it’s up to the courts to determine their fate. Don’t let others decide what kind of future your children will have.
Get to Planning!
Hopefully you have more than enough time to create a plan and see if it works for you before your baby arrives. By following these seven tips, you should be in great financial shape when your child is born. The goal is to enjoy parenthood without any major financial issues getting in the way!