If the new year means a new addition to your family, listen up! Having a new baby is a wonderful thing for you and your growing family. While having a baby brings joy and happiness to your household, it can also wreak havoc on your finances if you don’t properly plan. There are plenty of stresses involved with raising a newborn baby but having a solid financial plan in place can help reduce the financial stress. To help you get started, below are five financial to-do’s that new parents should consider.
Create a Baby Budget
Even if you have a well-laid out budget, you will need to make changes to it to account for the additional cost of your newborn. If you plan on making payments for medical expenses, you will need to include that in your new budget as well as diapers, feeding supplies, clothing, and doctor visit costs. It could be a good idea to start operating under your new budget BEFORE the baby arrives to acclimate yourself with any lifestyle changes. It may also be a smart idea to bake in some one-time purchases in the first few months/years. If you plan to return to work, you will need to estimate your child care expenses as well.
Make Any Necessary Insurance Adjustments
If you have a life insurance policy, you will probably need to increase the value to have enough for the care of your child in the event something unexpected occurs. If you don’t have a policy, now is the time to get one so that you can ensure your family is protected if you are no longer around. If you have just decided to start trying to have a family, it could be a good idea to get your insurance coverage before you become pregnant. It is also a good time to address any other policies, such as disability insurance, checking all of the amounts to make sure that you and your new family are fully covered.
Make a Financial Plan
This is a to-do list item that should be done regardless of if you have kids or not. The need for a financial plan only increases when kids are involved.
Find out what your employer covers for maternity or paternity leave and make sure to include savings in your budget so that you will have the amount of lost income during this time saved up. This will help you alleviate any strain to your budget after your little one arrives. If you don’t plan to return to work, or plan to work only part-time after your leave, you will need to create an adjusted budget and make other adjustments to bridge the gap that your loss of income will have.
The good thing about having kids is that you have roughly at least 9 months to get your plan in place. If you can start planning before then, even better, but don’t delay!
Start an Education Fund
Speaking of things to not delay on…education savings!
While it may seem like college is a long way away, it can sneak up on you in a financial sense. College tuition is one of the largest expenses that families will face when raising their child and all too often savings fall short because many parents don’t get started until later on in life. Starting early will help your money grow faster, reducing the amount that you will have to put into the account in the end.
Start or Increase Your Emergency Fund
2020 has really stressed the importance of an emergency fund. If you’re responsible for kids, the need for this emergency fallback only increases. This way if you suffer a loss in income, an expensive event, or unexpected major repair, you will have the funds to cover it without having to fall behind in bills or borrow against your assets. If you currently have an emergency fund, you will probably want to increase it as your financial need will be greater with a new baby.
There are so many amazing things that come with having a newborn. Don’t let the financial details of raising a child get in the way of enjoying every second! Like most financial endeavors, you’ll be better off preparing ahead of time. Don’t delay in getting your plans in place. If you need help planning financially for your child – we’d be happy to speak with you. Click here to schedule an initial call with our team.