Just a few, short summers ago, my friends and I were all in college, with nothing keeping us from taking off on a spontaneous weekend away. Now life is changing and it seems everyone is settling down…more likely to stay home discussing the ins and outs of teething and tiaras than boys on the beach. Although having a baby is a joyful and exciting experience, during the process some realistic financial concerns may creep up and cause anxiety for future parents.
Babies…so adorable and so full of expenses! Beginning with the doctor bills and ending with college, how can planning ahead make it a more comfortable stroll down baby lane? How will your current financial situation change with the cost of having a baby? What type of financial information, investment and budgeting plans should you take into account before and during pregnancy? Now’s the time to assess what you have and what you’ll need, so you’ll be ready when the time comes!
Take a look at your budget. How will having a baby affect your income and expenses? You may find that you need to cut down on your expenses and live life a little more frugally. Not only will you have immediate expenses like the nursery, doctor bills, etc., but you will also have the ongoing expenses such as diapers, clothing, food and daycare! You may also be in need of a more family-friendly car or a larger living space. Overall, the cost of raising a child in the U.S. is greater than investing in a home. So now’s the time to give your budget a makeover and start “practicing” living on less! It’s also a great idea to consult with a financial advisor by visiting our MEMBERS Financial Services for a planning and financial-needs assessment that will fit your particular situation.
Check with your employer to see if you’re covered by short-term disability insurance, which can cover pregnancy leave. Be sure to understand what your company’s maternity leave policy is for both parents, and how that will affect your overall income. Also consider whether or not you will be returning to work or staying at home once your baby is born. Doctor bills can add up quickly! Will your health insurance plan cover your prenatal and post-pregnancy costs as well as your newborn health needs? These are all things to find out right away in case you need to switch insurance plans. If your employer doesn’t offer health benefits, or you can’t afford them, check out the State Children’s Health Insurance Program.
Review or purchase long-term disability and life insurance coverage. No one likes to think about it, but you need a plan for your child if something happens to you. You will also need to update your will and beneficiaries to reflect your current intentions.
Financially plan ahead for baby. Consider transferring funds into mutual funds or higher interest-bearing CD’s. An automatic withdrawal each pay period will also guarantee a consistent growth in the account balance! It’s important to have a sense of what four years of college are likely to cost you and your child. By 2020, it could be as much as $287,000 at a private institution and $133,000 at a public one, based on College Board estimates. The bottom line is that the sooner you develop a college investment strategy, the less strain college costs will place on the family budget when your child enrolls.
A new baby may be tiny, but the expenses Mr. Stork will deliver along with your bundle of joy are quite large! Planning ahead and being consistent in your savings can make your financial life and well-being go a lot smoother after the delivery.
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