New baby, new family budget, and new experiences!
Congratulations! You’ve just gotten the positive pregnancy test results and you’re breathless with excitement — and nerves. Or maybe you’re a few months along, and the mild panic is growing right along with the baby bump. Regardless, a baby means big changes, and some of those changes bring many new expenses. The looming question is, how to financially prepare for a baby now that you're expecting?
Whether you’re only thinking about having a baby, or your due date is fast approaching, there’s no need to stress about finances. By taking the necessary measures today, you can learn to cover these new expenses without falling into debt.
If you're wondering how to financially prepare for a baby, start with these 6 tips:
Pay down debt
There’s more than just a nursery to set up before your baby’s arrival. It’s best to get your finances in order to make it easier to manage all new expenses and prepare for your child’s future. If this involves getting rid of a mountain of debt, you can choose between these two debt-kicking plans:
- The snowball method involves maximizing your payments toward your smallest debt balance first. Once it’s paid off, move on to the next-smallest debt, “snowballing” the payment from your previous debt into this one until it’s paid off, and repeating until you’re completely debt-free.
- The avalanche method involves maximizing payments toward the debt with the highest interest rate and then moving on to the one with the second-highest interest rate until all debts are paid off.
Adjust your family budget
Babies don’t come cheap. When your little one arrives, you’ll need to spring for baby gear and furniture, a new wardrobe, diapers, and possibly childcare. Most of these expenses will be ongoing, and it’s best to make room in your family budget for these new items before the baby is born. Spend some time reviewing your monthly family budget to look for ways to cut back on spending and give you that wiggle room to cover baby-related expenses.
Set up a baby account
All those baby expenses can be overwhelming, but if you break them down into bite-sized pieces, they’ll be easier to manage. You can do this by putting away some money for baby costs as soon as you plan on having a baby or find out you’re expecting. Consider setting up a new savings account at Clearview for all baby expenses to keep this money separate from other savings. You may also want to automate these savings by setting up a monthly transfer from your payroll or checking account to your “baby account.”Estimate prenatal care and delivery costs
When you financially prepare for a baby, you should also try estimating how much prenatal and delivery costs will impact your wallet. While exact amounts vary by state and by insurance provider, these costs can add up to thousands of dollars. This includes out-of-pocket expenses, co-pays, and insurance deductibles. Be sure to prepare for these expenses by saving up for them or by allocating a large windfall, such as a tax refund or generous work bonus, to be used for paying for prenatal care and delivery.Start saving for college
It may be hard to believe, but when you start learning how to financially prepare for a baby, you are also setting the groundwork to handle future expenses. With tuition now averaging $42,162 at private colleges, $10,662 for state residents at public colleges, and $23,630 for out-of-state students at state schools, according to data reported by U.S. News and World Report, this can mean paying a small fortune to give your child an education. In addition to spreading the costs over nearly two decades, starting to save for your child’s higher education now will give those savings the best chance at growth.
Consider opening a 529 plan before your child is born where your college savings can grow tax-free.
Write a will
No one wants to think about their own death when preparing for a birth, but writing a will — and purchasing life insurance if you haven’t already done so — can be the best gift for your child in case the unthinkable happens. Welcoming a new baby is a life-altering experience, and can mean big changes for your finances. Learning how to financially prepare for a baby can certainly feel overwhelming, but following these tips can help ensure that you and your family are well-prepared!