How to prepare financially for a child

The decision to have a child can be a joyful one; However, once you’re done celebrating, you also need to take some important financial steps to prepare for a baby to come into your life.

Here’s a closer look at how to financially prepare for a child.

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Increase your savings

Having and raising a child is an expensive affair. According to the US Department of Agriculture, the estimated cost of raising a child up to the age of 18 is $233,610. Housing, food (including expensive baby food), transportation, clothing, healthcare, child care, education are all included in the stats. And that’s before you start factoring in the cost of paying for a child’s college education.

Parents have a lot to save. So if you’ve decided to give birth to your own bundle of joy, it’s time to reassess your budget and make room for baby and child spending.

“It’s inevitable that couples will face increased monthly expenses once they have a child. It’s important to make sure these expenses fit into your budget,” says Tiffany Johnson, a board-certified financial planner at Piece of Wealth Planning in Atlanta, Georgia. “Also, a couple will want to review their emergency savings to make sure they have an adequate amount to cover themselves and a baby.”

Prepare for additional healthcare expenses

A mother will visit the doctor several times before and after the birth of the child. Well-baby check-ups are a necessary expense once the baby is born. So plan for these additional medical expenses by checking what your insurance covers.

“There are expected pre- and post-delivery costs which you should expect. Make sure you check your health insurance to see what your insurance covers,” Johnson says.

And don’t forget to add your baby to your health insurance.

“Many health plans require that your baby be enrolled within 30 days of birth,” says Johnson. “Be sure to check with your insurance provider so that both you and the baby are adequately covered.”

If you’re not sure about your provider’s policy, call the company’s 800 number and ask about baby coverage. Do you have to add your baby to your policy within 30 days of birth or is there a longer period? Add your baby to your policy as soon as possible.

Take advantage of low-income healthcare options

Are you pregnant and on a low income? You have health care options. You may be eligible for Medicaid and the Children’s Health Insurance Program (CHIP) in your state. Both offer comprehensive coverage for expectant mothers who qualify. So be sure to apply.

For more support, reach out to nonprofit organizations in your area that help expectant and new moms. You can get diapers, baby clothes, a stroller and more. For example, the National Diaper Bank Network provides clean diapers to families who need them, as does Help a Mother Out.

review employee benefits

It’s time to review your employer’s maternity and paternity leave policies.

“Every company has different periods, policies and requirements for parental leave. Make sure you check your company’s policies so you can plan for this period with your newborn,” Johnson says. “If your company doesn’t pay you during maternity leave or even takes a pay cut, you can plan ahead for additional savings.”

Talk to your partner and/or your support network about career choices and childcare choices. Are you earning enough to afford childcare? Can relatives and friends take care of the baby for free while the parent(s) go to work? In the case of a couple, would one parent be willing to step down from work until a child is of school age?

“Some individuals may choose to stay home to care for their child rather than pay for childcare,” Johnson says. “Also, some parents are choosing to change jobs to have more flexibility.”

Make the choice that works best for your family.

Get more comprehensive life insurance

Your family is growing and you need a more comprehensive policy in case something happens and the breadwinner dies. If both parents work, both can take out additional life insurance at this time. A larger or additional policy may increase your life insurance costs, but it will help ensure your family is financially secure if a parent dies.

“This will financially prepare the child in the event that one or both parents unexpectedly die prematurely,” said Alajahwon Ridgeway, owner of AB Ridgeway Wealth Management
in Lafayette, Louisiana.

Start saving for a child’s college expenses

Open a 529 college savings plan after your child is born. These savings plans give you a head start on your child’s college education expenses.

“We recommend making systematic contributions to the account as soon as the child is born and receives their social security number,” says Ridgeway.

But don’t get so excited about your college savings that you neglect your retirement savings. Your retirement savings should always come first.

“They must put their own financial well-being ahead of college savings. That means investing enough in their retirement savings first,” says Andy Tilp, founder of Trillium Valley Financial Planning in Sherwood, Oregon. “A popular saying goes that there are alternatives to paying for college, but not retirement.”

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