Are You Financially Prepared for a New Baby?
Welcoming a new baby to the family is an exciting time, whether it’s your first or not. Expecting parents have to do a lot of preparation so that they’re as ready as they can be for when the little bundle arrives. Having a new baby typically means major long-term changes to your budget while also presenting short-term spikes in spending.
As parents are making purchases, they need to make sure they understand the effect each may have on their finances. It can be easy to overspend and accumulate debt when you’re so focused on welcoming a new baby to the family.
There’s a lot you’ll spend money on over the next 9 months that you wouldn’t have factored into your previous budget. Cut back on expenses you can do without and take a look at any subscription services you have that you don’t need. The money you save on these items will quickly be replaced by clothes, diapers, bottles and everything else baby will need. You may receive some of these items as gifts from family and friends, but your overall spending is likely to go up.
Saving for the unknown becomes even more important with a growing family, so make sure you’re giving yourself the biggest cushion you can. Even putting $10 aside each week will add up quickly and can help in the event of an unexpected expense.
Consider opening up or increasing contributions to a Health Savings Account (HSA). This allows you to set aside pre-tax dollars for certain medical expenses. With that money, you can pay for things like birth classes and prenatal vitamins, just to name a few. And that continues after the baby arrives with things like thermometers and medications. Check with your health insurance plan for qualified expenses.
Your work life after a baby may be drastically different than it was before. You may choose to go back full-time, part-time or not at all. Think through how each decision affects not just your income, but also your need for things like childcare. There are more options than ever to work from home or to add a side hustle, so do what works for you. Lastly, it’s the right time to make or update your will, as well as update your beneficiaries.
Make a plan to save money for your new baby. This could be through any cash gifts that people give or by depositing money from your paycheck. Talk to a financial advisor about potentially opening a 529 account (depending on your state), which can help you save money for your little one’s education.