7 Financial Tips for New Parents
New babies are a wonderful addition to your family and finding out that you’re pregnant or that you’ve been chosen by an expecting mother to adopt her child is a very exciting time. But it can also be scary and unnerving. The changes a new baby can bring can be unexpected.
Let’s take a look at seven simple things you can do to prepare financially for your new arrival.
Confirm insurance policies and family leave plans
One of the first things you should do when you learn you’re expecting is to check your health insurance policy. Does it cover childbirth and the related appointments and expenses? What co-pays and deductibles do you have and when are they due? This information is important to have so you can plan for those expenses.
Don’t limit yourself to just health insurance though. Go over your life insurance as well. Does it provide adequately for your growing family? Should you increase it? Don’t forget homeowner’s insurance and car insurance as well. You want coverages that allow for all eventualities. Increasing homeowner’s personal property coverage to cover things like cribs and making sure your car insurance will cover a damaged car seat are important.
Don’t forget about taking some time off when baby arrives too. Check with your employer about maternity or paternity leave (and remember that even if they don’t provide it under that name, you may be able to take FMLA for it). Find out when you need to submit paperwork to take leave, how long you have, and any other details that may be important to make sure you can take leave.
If you’re self-employed, begin informing your clients early and often that you’ll be out of office for however long. Create standard operating procedures in writing so your clients can handle things in your absence. Build a network of other professionals to whom you can refer your clients for the things they can’t handle themselves. Pre-schedule and complete whatever you can.
Budget for your new addition
You may already have a budget in place. A new baby means a new budget. But it doesn’t mean you have to throw your existing budget out the window.
Take a look at all of your existing expenses. Then consider expenses you’ll have once the baby arrives. Some of these expenses might include:
- Breast pump
- Diaper wipes
- Baby clothes
- Car seat
- Medical expenses
- Childproofing supplies
Some expenses may be a single purchase while others may be ongoing. It’s important to do some research and find out how much you’ll need to cover these expenses.
Adjust and increase your budget as you need to in order to allow for these expenses. Look for ways to cut costs on these expenses too.
If you’re concerned about the increase in costs after the baby arrives, begin tracking your spending now. Look for areas where you might be able to cut expenses, such as:
- Making coffee at home instead of stopping at Starbucks
- Trading in a more expensive car for one that’s more affordable
- Shopping at a different grocery store that’s less expensive
- Downgrading a cell phone plan
This is why having your budget is so important. Your personal budget allows you to see the specific areas in which you can cut costs, rather than relying on generic ideas from others.
Work together with your spouse on this. Ideally, tracking spending and cost-cutting measures should be across the board for both of you, not just one.
Buying used? Be careful!
One way that we often try to cut costs is by buying used items. This can be an excellent cost-cutting step. If you’re buying things like clothes or most toys, you can generally buy or accept hand-me-downs without much worry.
Items such as strollers, car seats and cribs require a little more due diligence, however. These items may have recalls on them. But car seats may also have been damaged in an accident that makes them unsafe for continued use.
You can check with Consumer Product Safety Commission for recall information on strollers and cribs, riding toys, etc. While you can also check for recalls on car seats, it is important to note that you only have the seller’s word that a car seat was never in an accident. Unless it is still brand-new and in the box, it’s probably better to pass on used car seats for your child’s safety.
Look at flexible spending accounts
If you or your spouse have health insurance through an employer, you may have access to a flexible spending account. This account lets you put pre-tax income into it that can then be spent on health-related expenses. Sometimes you can also create an account in which you can put that same pre-tax income to cover childcare expenses.
These accounts save you money because you don’t have to pay taxes on the funds. It can also help by setting money aside specifically for those expenses without needing to keep track of it in another personal account. It can also benefit you if you know that without setting it aside, you may not have that money when you need it.
These accounts can only be used for their intended purposes (i.e., healthcare-related expenses), so it’s important that you not only remember to use it but also make sure that you don’t set too much aside. At the end of the year, whatever you don’t spend will be lost. Some employers may allow a grace period or for you to roll over unused funds. Regardless, decide carefully how much to put in these accounts.
Set up accounts for the kids
It might seem weird to start setting up financial accounts for a newborn, but there is no better time. You can set aside money for their college tuition in a number of different ways, including a 529 account.
More than that, however, you can put money in a trust for your child. This money will give them a secure financial start after they reach an age specified by you. This can help them buy their first car, their first home, or even provide for their own children.
It can also be used to help care for your children in the event of your death. It’s not pleasant to think about, but if you were to pass away while your children are minors, a loved one or trusted friend will need to care for them until they’re adults. While they may be willing to take on your children out of love, it is an unanticipated financial burden. Providing some funding to help out with that can ease the load a bit.
It is usually a good idea to talk with a lawyer or financial advisor to ensure that you set up these accounts correctly and make the most of what you put in them.
Expect the unexpected
No matter how much we research and plan, there’s always going to be something that we don’t expect. A medical bill, a job loss, a home repair or car repair. Sometimes multiple things at once. We can try to prepare for these things with an emergency savings account. But sometimes the unexpected goes far beyond what we prepared for.
Save money. Create budgets. Be prepared for every possibility you can think of and set aside some extra for the things you can’t think of. But don’t beat yourself up if the unexpected happens and you find yourself floundering, both financially and emotionally.
Parenting is a tough gig. It can tax us in so many ways, emotionally, mentally, and physically. But it doesn’t have to totally deplete us financially. With a little preparation, you can have a financial plan and safety net that sets you up to handle almost anything that parenting throws at you.