Nothing compares to the joy of finding out that you’re going to be a parent. For many, the financial uncertainty of bringing a child into this world can add a lot of stress. See below for 6 tips to help you roll with the punches once the baby comes.
Make Sure Emergency Fund is in Place
You should have between 3 and 6 months of living expenses set aside as an emergency reserve. Having a little one is only going to increase the chance of emergencies (they get sick, break expensive things, etc.). If you don’t have an emergency reserve in place, now is the time to make a plan to save for an ample rainy day fund.
Plan for Increased Expenses
With additional humans come additional expenses. If you have a budget, start to think about what it will look like once the baby comes. If you have no idea how much the baby will cost on a monthly basis, click here for a cost calculator. Once you have a good idea of what the newborn will cost, start thinking about what expenses need to be cut to accommodate the cost of junior. Don’t forget about the increased cost of health insurance (see below).
Evaluate Your Health Insurance Options
Make sure you have a good idea of what your current insurance covers for maternity exams and childbirth. If there are other health insurance options available, see if you can switch to a plan that will provide more coverage for childbirth related expenses.
Also, check to see how much more it will cost to add the baby to mom or dad’s health insurance plan. Having a baby qualifies as a “qualifying life event” that will give you a chance to change your health insurance through work or on the healthcare exchange outside of the annual open enrollment period. For some, it may make sense to switch from one plan to another depending on the increased cost of adding dependents.
Plan for Paid/Unpaid Leave
Have you and your partner discussed how much time you plan taking off? Now is the time to discuss the plan for employment leave after the birth. Make sure that you know if your employer offers paid, unpaid, or partially paid leave, and for how long these benefits last. If you plan on taking unpaid or partially paid leave, it’s especially important to have money set aside to pay for expenses while you’re off the payroll.
Think About Estate Planning
If you don’t have estate planning documents prepared, now is the time to start thinking about what you would like to happen in the event on your death. You should be thinking about to whom your belongings would pass and who you would want as a guardian for your child. You can work these intentions into your estate planning documents. Now is also a good time to re-assessing your life insurance needs, taking the baby into account.
Start Thinking About College
Start discussing what percent of college costs or dollar amount you’d like to pay for. Develop a plan to save enough to achieve your college funding goals. Just like retirement, starting early is one of the most important things you can do to accumulate enough to achieve your goals. Once you’ve developed a savings plan, work with an advisor to see which 529 plan works best for you.
Financially preparing for a newborn can help you plan for the anticipated as well as protect you against the unexpected. If you still don’t know where to go from here, look to meet with a professional with the education, experience, and ethics of a Certified Financial Planner, or CFP® to help you plan for your newborn.
– Adam Glassberg CFP®, CIMA®