Financial stress can significantly impact your experience as a soon-to-be and new parent, so it’s important to prepare financially for baby to make room for as much joy as possible!
Having a baby savings fund can help cover one-time costs associated with the birth and bringing home a new baby, as well as cushion any changes in ongoing expenses due to your growing family.
Follow these four steps to prepare financially for your new baby:🐣
1. The Talk: Preparing for Change
You and your partner need to talk about how life and work is going to change both during pregnancy and when your baby is here.
If you have a partner, they should be involved in the financial planning for your family. Making this a team effort as much as possible can help both of you be aware of the financial changes (and the changes in your relationship) that will come when you bring your new baby home.
Don’t have a parenting partner? The questions below still apply, and we encourage you to reach out to friends and family to make sure you have a solid network of support when baby comes. You’ve got this, but you don’t have to do it alone.
Have a discussion around the following, and jot down notes to use in later steps:
- Work Will both of you continue to work? If one parent stops working, do you expect it to be a permanent change or a temporary one?
- Parental Leave How does it work for you, and what will each of you take? Will you take it all at once or spread it across the first year?
- Childcare Who will care for the baby if/while both parents are at work? What are common daycare and nanny expenses in your area?
- School Will the child go to public or private school? If your child goes to college, do you want to pay for some, most or all of it?
- Healthcare What is the birth plan, and expected costs? Whose health insurance will cover the new baby?
- Admin & Beneficiaries Review your insurance and other documents, update beneficiaries.
Once you and your partner or other support person have discussed the above, it’s time to start putting some numbers together!
2. Designing for Family life
Often this is the time when couples look to make some shifts to re-design their life and living situation for the baby. This might mean a new car, or even moving. It's all part of preparing financially for baby!
- New Car Discuss whether you need to upgrade your car, or get a new car, if so, it might help to create a fund or transfer a lease to a bigger car.
- New House Is this a time to move into a bigger house? Whether you’re renting or buying you might need more space with kids. It’s helpful to talk about this now, and you don’t have to move straight away but take the time to save up for a move even after the baby comes.
- New Furniture Whether you’re moving to a new house or simply adding more baby furniture, remember to go with used stuff as kids will age out of it pretty soon, and definitely be messy - so a brand new white couch, not the best idea!
Top Tip: Remember that kids can be messy, so don’t spend too much time and money looking for brand new things, whether it’s furniture or a car. Most of the things you buy now will be used to the max by the kids and the family, so used might be better than something new!
3. One-time expenses
In addition to changes in your lifestyle once the baby comes, there are significant expenses associated with the baby’s birth, supplies, and changes to your home life.
- Hospital Bill Even with insurance, hospital bills for childbirth can range from $7,000 to $10,000 even in non-complicated scenarios. Costs vary, so research what is expected for your hospital and birth plan. Consider the costs of non-hospital resources as well, like a doula or self-care during pregnancy.
- Leave from Work Once you’ve considered whether you will be paid during your time away from work, and/or how much unpaid leave you want to take, determine how much you will need to replace your income during that time.
- Supplies Make a list of everything you’ll need for the new baby (a baby registry is a great way to do this so that you can share with family and friends), then estimate how much will need to be paid for out of your own pocket. High chair, car seats, stroller, baby gates, etc.
- Estate Planning You can either meet with an estate attorney or use an online service like Trust & Will to make sure your baby will have the life insurance and asset protection they need if something unfortunate were to occur. It may seem like a morbid topic, but protecting your family is something that should never be ignored!
Total up the amounts you’ll need for each of these categories (and any others that are relevant to your situation, like a dog-sitter during the birth or a ‘babymoon’ trip right before birth), and plan to contribute or transfer from savings to build your Baby Fund!
Your Baby Fund can go in a High Yield Savings Account with no fees and no minimums, and can be repurposed as a Savings Account for your child once they are born.
4. Changes in ongoing expenses
Once the baby arrives and the one-time expenses are paid for, you’ll still need to account for changes in your lifestyle! Your spending plan, or your plan for allocating your income to expenses and goals, should be revisited with the following areas in mind:
- Income If one parent will stop working or work part-time, what will be the reduction in income for your household?
- Childcare What will you pay monthly for a nanny or daycare?
- Healthcare How will health insurance premiums change once the baby is added? What is the expected out of pocket amount monthly for baby’s doctor visits?
- Supplies Diapers, baby wipes, baby food, baby clothes, more diapers. Do some research here, what do parents spend in your area?
- Child Savings Accounts Whether it’s a traditional savings account or a 529 savings account for college, decide how much you want to set aside monthly for your child’s future, and include it in your spending plan.
- Other You may save money on things like going out to eat and hitting up bars, but also spend more on take out and educational toys Instagram guilts you into buying. Pay attention to these, and make sure to spend mindfully during this time as much as you can!
You don't have to navigate this time of life alone. 👯
With a Bolder Money membership, you can get a personal Money Coach supporting your family to prepare financially for life changes, as well as a community working to build wealth right along with you. Book a free call with one of our coaches to get started.
