How to Financially Prepare for a Baby
Congrats, you are having a baby or considering having a baby. This is such an exciting time. However, a lot of things are about to change, including your finances.
I worked in the financial industry for three years under a financial planner and a financial analyst. Throughout my work experience, I have gained knowledge about financial planning.
Here are some steps you can take to financially to prepare for the arrival of your little bundle of joy:
1. Take a Financial Inventory
Understand where your money is coming from and where it is going. This is a crucial step and will help you prepare a budget to determine where you can save.
2. Save at Least 3-6 Months of Living Expenses in Cash (Emergency Fund)
Having at least 3-6 months of living expenses in cash will provide a nice safety net in case of emergency or job loss. Saving this amount may seem like a daunting task, but it is important to try to save at least three months in case of an emergency if you or your spouse lose your job or unexpected expenses such as medical arise. If this seems impossible, try to save as much as you can each month. Start small, $25-$50. Saving anything is better than nothing at all. Put this amount in a savings account and vow not to touch it only under extreme circumstances.
3. Check up on Your Health Insurance
Check with your health insurance on what they will cover throughout your pregnancy and birth. You will be heading to the doctor a lot more, have more tests done than usual, and generally have about two ultrasounds done. Determine how much you will be responsible for paying, and begin saving for those upcoming expenses. If your company offers an HSA, this is a great way to save and pay for medical expenses because the money saved and spent in those accounts are tax-deferred. You can even invest these funds once you have a certain amount of money in the account.
4. Say Yes to Hand-Me-Downs and Freebies
There are so many people willing to give away their old gently used baby clothes for free. The reality is that babies grow out of clothes very quickly, so most baby clothes people give away or that you can find at a consignment store, are only worn a few times. You can find people on Facebook groups or neighborhood groups who are giving away their old baby clothes.
Check with your insurance to see if they will cover your breast pump at no cost to you. You should also register for all of the free samples you can get.
5. Create Your Registry Early On
Your friends and family are going to be so excited for you and ready to spoil your little one. You will want to make sure you give them the opportunity to get you what you really need. There are many places you can register at including Amazon, Buy Buy Baby, Target, Babylist, and more.
6. Discus Maternity Leave, Work, and Daycare Plans with your Spouse
You will need to determine how much time you will have off from work once the baby comes, discuss if you or your spouse plan to return to work or if someone will stay home to take care of the baby (if you can afford to do so).
If both you and your spouse plan to return to work, you will need to research daycare options and determine how you will pay for the cost.
If you or your spouse plan to stay home to take care of the new baby, there are some great ways you can work from home to make some extra money and make your own schedule. Here are a few ideas:
- Online Freelancer- If you have a specific skill-based service you complete from home, such as web design, copyediting, or graphic design, you can offer these services as an online freelancer. You can find work using websites such as Freelancer and Upwork.
- Virtual Assistant- Small businesses will often hire virtual assistants if they cannot afford to hire a full-time in-house worker. They typically work from home, performing tasks that an administrative assistant or secretary would normally do. You can find virtual assistant jobs at Upwork, Indeed.com, and Remote.co.
- Freelance Transcriber – If you have excellent typing skills and accuracy, you could consider freelance transcribing. Consider the company Rev.com, which hires freelance transcribers.
- Teach virtually with VIP Kid – Teaching with VIP Kid is easy and rewarding. The hours can be strange, but they give you everything you need for each lesson you teach.
- Start a Money Making Blog – There are many different hosting and website building sites. You will want to first decide on your niche and research how to get started. I use Blue Host to host mine, but there are many other ones out there. There are also quite a few website builders you can use, such as WordPress, Wix, and Square Space. You will want to research each one to decided which one will best fit your needs. I use WordPress because I was already familiar with it. Keep in mind that it can take some time to build your blog and gain enough traffic to begin making money.
7. Start Thinking about Saving for College
Do you and your partner plan to pay for your child’s college education? If so, you will want to begin saving as soon as possible. According to CollegeCalc, the current cost of an NC in-state college is about $25,000 a year. That is about $100,000 for a 4-year degree.
The earlier you start saving, the better off you are. If you start saving early, your money will have more time to grow, meaning your out-of-pocket dollars will be less.
There are many different types of accounts in which you can save in. Some of the most common accounts are listed below:
- 529 prepaid tuition plan
- 529 education savings
- Coverdell ESA
- Custodial Accounts
- Roth IRA’s
If you are unsure which account is best for you, you should speak to a qualified financial professional. You can also read more about these accounts at www.thebalance.com.
8. Have a Will Drafted or Updated
You are about to bring the most precious baby into the world. You will want to make sure you have a plan for how your child is cared for in case something happens to you and your partner. If you do not have a will, this will leave the courts to decide who will take care of and raise your child. You can have a will drawn up by an Estate Planning Attorney.
9. Practice Living Financially Like You Already Have a Baby
If you begin practicing early, it will make it easier when the baby comes. Start by estimating how much you plan to spend on the baby per month. Instead of spending that amount, take that dollar amount and immediately save it for future unexpected baby expenses.
Practice living this way for a few months before the baby comes. If money seems tight or unmanageable, you know that you will have to make some changes to your budget. It is better to be prepared and ready to modify than be surprised and feel strapped when the baby comes.
10. Continue Saving For Retirement
Sure saving for a baby and their college education is important, but you do not want to sacrifice your own financial future. Like you have probably heard on the airplane 100 times if you travel, ” Put your own oxygen mask on before assisting others”. This is the same idea for retirement. Make sure you are taking care of yourself first. As much as you would like to fully fund your child’s education, you want to make sure you are set up for a successful future first. You do not want to become a financial burden on your children in the future because you did not prioritize your own savings as #1. The key to saving for retirement is saving early and saving often, so keep saving money in your 401k, IRA, or other retirement savings vehicles.
I am not a financial professional, and if you have questions that pertain to your specific situation, you should contact a professional. These are simply guidelines and ideas that you can take to help prepare for your baby.
I hope you found these tips helpful. Again, Congrats, and I hope you have a healthy pregnancy and baby. Good luck! If you found this helpful, check out some of my other pregnancy-related posts by clicking here.
