9 Tips to Financially Prepare for a Baby
Preparing for a new little one can be an exciting experience, yet it can also cause some financial anxiety. Babies require diapers, formula, and gear that you may not have on hand, especially if this is your first infant. Outside of day-to-day expenses, there are large medical bills and long-term finances to consider. Use this guide as a resource to help prepare if you are planning on expanding your family or are expecting a baby.
Plan, analyze and implement your new family budget. If you are already pregnant or planning to start a family in the future, your primary focus should be on saving. Before you start to create your spending and saving plan, you should determine how long your maternity or paternity leave will be. Does your employer offer paid leave? Depending on how long you plan on being off work, try to save a maternity leave nest egg to cover expenses and payments until you are ready to return to work.
Once you are back to work, you may need childcare. Research and decide what type of daycare provider is best for you and start checking for openings BEFORE the baby is born. There may be very few options for childcare in your area meaning it is essential to get on a waiting list early. Once you have chosen a daycare or care giver, rearrange your budget to start planning for those costs before the birth of your baby. You can either save those specific funds for daycare, use them for baby/medical expenses, or funnel them into another type of savings account such as an emergency savings account. The important thing is to get used to having that set amount for childcare as part of your monthly budget.
Your next priority should be building your emergency savings account that should be used for loss of income ONLY. If your partner loses their job while you are on maternity leave, the emergency account would be able to soften the blow. Once you save the total cost of your household/debt expenses for three months, you can start to save the money towards another goal.
If you are unsure of how to create a spending or saving plan, check trustworthy online resources or contact a financial counselor.
Pay down your debt before the due date
This tip goes hand in hand with evaluating your budget. Paying down debt can help give your family the clean slate it needs before the baby’s arrival and lessen the financial responsibility of making payments during maternity/paternity leave.
One of the best ways to make a dent in your debt in a short amount of time, is to practice Rapid Debt Repayment:
- Decide what motivates your family. Is it paying off high-interest debt first? The lowest balance so you can see results sooner? There is no wrong answer. Whichever debt meets your motivation goal is the debt that you will pay down/off first.
- Once that loan is paid off, you will allocate the funds that were normally budgeted for Loan #1’s payment and add that to your monthly payment for the next loan.
- Continue until all debt is paid. This method can cut YEARS off your debt payment plan.
Rapid Debt Repayment only works if you make a commitment to be more frugal with debt. If you feel you need assistance or are struggling under a large amount of debt, reach out to your financial institution or a financial counselor for help.
Call your medical insurance company to review your policy
When you start sharing your good news with family and friends, some might tell you certain things are covered by your insurance or quote the cost of a prenatal procedure they had several years ago. To plan for these expenses, it’s best to do your own research directly through your insurance company. Call your insurance provider to go over your policy and ask any questions you may have. If you don’t already have a primary care doctor, find out which clinics and hospitals you can visit in your network.
Throughout your pregnancy and the baby’s first year of life, there are going to be doctor’s appointments, tests, screenings, and delivery costs. Talk to your provider about which procedures, products and services are covered by your insurance policy. For example, most insurance companies will pay for a breast pump to encourage breast feeding.
TIP: Assume you will be paying your deductible during the delivery and the baby’s first year. Doing so can help you save in advance. Consider setting aside this money through a health care flexible spending account. FSAs are set up through your employer and funded through payroll deductions on a pre-tax basis.
Balance your wants vs. needs for the baby
There’s an old saying… “babies aren’t expensive, lifestyles are.” The only expectations your baby has coming into this world is to be fed, have a clean diaper, and sleep. Their needs are relatively inexpensive compared to all of the baby gear and gadgets available today.
Babies can be picky or prefer certain products to others. For this reason, it may be best to “test’ certain items before stocking up. Instead of purchasing eight of a certain type of bottle that has a lot of great reviews, start with a mix of a few different types and determine which one works best for your little one. Once you know, you can then purchase more with peace of mind and less unused, excess bottles cluttering your kitchen. The same concept can be applied to selecting a diaper brand, pacifiers, onesies, and more!
If you are doing your research online and following parenting social media accounts, it can be tempting to buy your baby this season’s “must haves”. If you are starting to feel overwhelmed, try doing some research on “minimalist parenting”. This idea revolves around meeting the baby’s needs, cutting down on clutter, and raising your infant frugally.
Tip: Make sure to register for practical items on your baby registry and clothes in a variety of sizes. Give your friends and family an assortment of options to buy for your new little one, but don’t go overboard registering for things that seem more like fun gadgets.
Even if you intend to breastfeed, budget and plan for formula anyways
Nursing your newborn may be your first choice but it will help to have a backup plan. Sometimes due to a low milk supply or for other reasons, mothers need to turn to formula to feed their babies. If you were planning on breast milk and now need to switch to formula, it can put a significant dent in your budget. If you prepare and either save or set aside a certain amount each paycheck, it can help lessen the impact on your weekly spending plan.
One great way to save on different brands of formula is to sign up for formula clubs directly through manufacturers for free samples and coupons.
Believe it or not, you CAN plan for the approximate amount of diapers your baby will need!
If after your baby shower you are still in need of diapers, research diaper charts online. You can get an estimate for the numbers of every size your baby will need. This is a great way to avoid having a large amount of extra diapers when your little one graduates to the next size. This chart can help you when there are sales on diapers. You can also get great deals by joining coupon clubs directly through manufacturers.
If you do decide to stock up, before you purchase, figure out the price per diaper in the package. Sometimes the smaller packages of diapers are cheaper per diaper than the larger boxes!
Avoid paying for convenience or impulse shopping if possible
Instead of purchasing items that promise to make life easier, see if there is a way you can utilize what you already own or prepare for day to day tasks during your pregnancy. For example, some evenings you won’t have the time or energy to cook dinner after your delivery and may be tempted to spend money on takeout or fast food restaurants. Instead, invite a friend over to try food prepping and freezing your favorite meals a few months before your baby comes.
Most baby toys are cute and promise to help with development, tempting you to purchase something new often. When your baby has too many toys, they may have too many options and become bored, tempting you to buy new ones when you’re shopping. If that’s the case, try out toy rotation. Start with a small toy bin and fill it with some of your child’s toys and store the rest. When your little one wants a new toy, try swapping a few toys out for ones that are stored. Doing so will cut down on impulse buys, clutter and cleanup time!
Be thrifty when it comes to baby clothes and gear
When possible, try to buy lightly used clothing, furniture, and accessories second hand. Babies grow fast and can easily outgrow clothing before it is worn. Infant clothing typically doesn’t show wear and have stains that can be removed.
Try joining an area mother’s group on social media, through a community center, or church. Many of these groups have a focus on sharing items or swapping baby gear which means you can get what you need at a fraction of the cost.
If you do buy new clothes, don’t overdo it on newborn or early infant clothes. Babies grow fast during the first few months, so avoid stocking up on 0-3 mo. clothes that your baby may never wear.
There are a few items you should always try to purchase brand new if possible. Certain breast pumps cannot be cleaned and sanitized properly and can grow bacteria. If you cannot get a free pump through your insurance company, add a pump in your price range to your gift registry. The other must-have you should purchase new is your baby’s car seat. Car seat safety is important and can decline based on the seat’s wear and tear, age, and crash history.
Now is the best time to plan for your new family’s long-term financial future
When you decide to expand your family or find out you are pregnant, visit with a reputable financial advisor to create a financial game plan. Besides saving for college, you may want to discuss your options for life insurance, beneficiaries, and other saving or investing vehicles.
While you are planning and making your new budgets, don’t forget to keep saving for your retirement. If you take a break from contributing to your 401k during the early years of your child’s life, you could push off your retirement date or lose earning opportunities. If you need help fitting this into your spending plan, talk with a financial counselor.
Don’t forget to open your baby’s first savings account! Help them start healthy saving habits at a young age while keeping their money safe. Once your child has a social security card, visit your financial institution for more information.