Raising a child until they are 18 years old costs about a quarter of a million dollars, according to an August 2014 report from the U.S. Department of Agriculture. Most of us don’t have millions of dollars in spare change laying around, so paying for children can be difficult—especially when it is your first child! Starting a family will completely change your finances and, as you will find out, parenting is more headache than just calming the crying baby. From budgeting to insurance, it is best to get your ducks in a row in advance.
The first step after finding out about the pregnancy is to understand your insurance. You’ll need to figure out what is cover and what isn’t covered and use this to estimate the medical expenses.
After Baby is born, they will have to be added to your insurance plan. Most companies give 30 to 60 days to add them. Make this a priority, because the last thing you want is to be stuck with the expenses of a sick baby!
If you are looking for insurance, the Affordable Care Act provides health insurance for pregnant women, and you can start a policy even if you’re already pregnant. If you qualify for Medicaid based on income, essential coverage is available for pregnant women.
Review your employer’s maternity and paternity leave policies to find out how much time off you will get. Most large companies provide at least six weeks of maternity leave, but smaller companies may have no maternity leave policy. In this case, you can use other time off like sick days and vacation time, so you’ll have some time to recuperate after the pregnancy.
Save money and plan the cost for items that will be needed right after giving birth, such as a baby formula and bottles, car seat, stroller, diapers, playpen, and baby monitor. Buy these items and set them up before giving birth, so you won’t have to worry about doing it afterwards. Save money by asking friends or family members for hand-me-downs and going to second-hand stores, but buy new for safety-related items like the car seat or crib. The baby shower gifts should cover some of the baby’s needs!
In addition to one-time expenses like a car seat, you’ll also need to adjust your long-term budget for recurring and future expenses. Recurring expenses include baby formula, clothing, and diapers, the costs of which will add up over time. Decide if you will you work after the baby is born, and factor this into the budget. Also make plans for childcare expenses. BabyCenter estimates a newborn baby will cost between $10,000 and $12,500 for the first year and slightly more the second year, so it is essential to adjust how you spend your money.
In a 2015 article about child care costs for U.S. News, Lindsey Cook reported that “child care costs are higher than rent in 500 out of the 618 areas examined in a recent institute study. There is also great variation among states, with the monthly care costs for a 4-year-old ranging from $344 in rural South Carolina to $1,472 in the District of Columbia.”
The Boston Globe reported that, in 2014, South Dakota had a relatively low cost of full-time child care at about $6,071 per year. If available to you, child care costs can be cut by having a family member or close friend look after the baby while you’re at work.
No one expects to die and leave their child without support, but life is unpredictable. Make sure your child and family has a safety net in the event of you or your significant other’s death. Life insurance is important when you have people that rely on you and your income, so consider buying a plan that would help with your family’s expenses in the event of your death. Also update or create your will. While making the will, identify the person who will become the guardian of the child in the event of both parents’ deaths.
The earlier you start saving for the child’s college fund, the easier it will be. Create a savings account for their college after they’re born. Saving a little bit per month will help immensely once the baby has grown and is preparing for college. Saving $100 per month for 18 years will be $21,600, which is enough for a decent college! Graduating without debt will set your kiddo on track to financial security. Look into opening a 529 Plan, which savingforcollege.com defines as “an education savings plan operated by a state or educational institute designed to help families set aside funds for future college costs.” A 529 Plan can simplify the process of saving for college!
It can be exhausting to adjust your entire financial reality with a baby, but don’t put other financial priorities on the back burner. Continue saving for retirement and your other financial goals.
While it may seem like your baby is eating away money non-stop, remember that spending money on your child is the best investment you can make! Don’t worry—not everything has to be done all at once!