Getting ready for your first child will be one of the most exciting – and potentially stressful – times of your life. But before even starting to get into the nitty gritty financial details of what you’ll need to have prepared before your little bundle of joy arrives, take a second to rejoice.
You’re having a baby – congrats!
Then, once the initial giddiness has worn off, you’ll probably have about a thousand questions all at once:
- Will I stay at work?
- What do I need to buy?
- When should I start saving for college?
- Will my health insurance cover everything I need?
We’ll help walk you through each of the major important financial phases of having a baby, so when Junior arrives, you’ll hopefully be feeling calm and prepared.
Ready? Let’s take a walk down Baby Lane …
Step 1: Figure out your health insurance coverage
It should come as no surprise to you that having a baby requires lots of doctor’s appointments. From ultrasounds and glucose tests to genetic testing options and general checkups, over the next nine-plus months you can expect to become very familiar with your obstetrician.
So — just how much can you expect to pay for the joy of bringing your little one into the world? According to WebMD, without health insurance you can expect to pay about $2,000 for prenatal care (which doesn’t even include delivery and hospital stays), although remember that this number can vary drastically.
To gear up for prenatal and delivery costs, your first step before visiting the doctor (if you don’t already have one through your insurance) should be to check with your health insurance carrier for your options. They will be able to help you figure out which providers in your area are in-network (meaning you’ll be covered for visits with them and won’t have to pay additional out-of-pocket expenses), as well as which tests, check-ups and procedures are covered under your plan. Some things to remember:
- Keep in mind that certain procedures tend not to be covered by most insurance plans (mostly optional tests, like genetic testing, for example), and they can cost a pretty penny if you plan to pay for them out-of-pocket, so get all the financial details up front before having anything
- This extends to your hospital stay and delivery, as well. For example, the anesthesiologist in your hospital may not be covered under your health insurance plan, even if your doctor and everything else is. Again, always check with your insurance provider ahead of time so you can be prepared for any additional expenses that might come your way. No question is a silly question when you’re pregnant!
After you find out your maximum out-of-pocket expenses (aka the absolute highest amount of money you should have to pay for covered procedures and services performed by in-network doctors), you can budget accordingly so there are no big surprises come bill-paying time. Of course, sometimes surprises still come up, but if you think negotiating or haggling over your pregnancy medical bills might be in your future (which could be especially true if you don’t have coverage right now), it’s best to discuss that ahead of time with your doctor and figure out a plan. Along those lines, check out this piece for any additional specific pregnancy billing questions you might have.
Once you’ve figured out your own health insurance coverage, don’t forget that Baby will need insurance of her own once she’s born. If you or your significant other can provide it for her through your employer, get the specifics of that policy as soon as possible, or else check out your options through the healthcare marketplace.
- If you’re uninsured: Keep in mind that if you’re currently uninsured, pregnancy does not qualify as a ‘change of life’ situation that would allow you to sign up for a healthcare plan outside of the open enrollment period, which starts again on November 1 and will run through January 31, 2017. Having a baby, however, does. If you’re outside of the open enrollment period and find yourself pregnant without health insurance, you do have a few options, including checking into your Medicaid eligibility, potential COBRA coverage if you recently left a job, or you may even be able to still get coverage under your parents’ plan, depending on your age and their policy.
Step 2: Take control of your budgeting and spending
If you listen to everything everyone says about how expensive it is to have a baby, you’ll most likely decide to never have one. In fact, according the recent USDA findings, the average cost of raising a child today is over $245,000, which doesn’t cover college or inflation.
Before you have a panic attack, consider some of the things these types of findings do cover, like housing expenses (which you’re most likely already paying, although you may need a larger space, depending on your circumstances), food and transportation expenses (which, again, you’ll already be paying some money towards, anyway) and miscellaneous items like personal care, entertainment and reading materials, which can vary widely.
In other words — take a step back from studies like this and reassess, because it will be okay … as long as you budget. In truth, you will be spending more on food and transportation once Baby arrives, and if you need a new car or a bigger space to live you’ll need to add those additions into your current budget. (We’ll talk about childcare in its own section.) To get ahead of the curve before Baby arrives, consider taking the following steps:
- Revisit your current budget: Sit down with your significant other and assess your current living situation, including where you might need upgrades, like with a second car or a bigger house. Determine how much extra you can afford to put towards these upgraded things each month so you can put together a new, baby-friendly budget to work with.
- Cut back where possible: Try to consider areas in your current budget where you can scale back, at least for a while, to make room for your new expenses. For example, perhaps monthly subscription services can take a backseat for now, since you’ll likely have little time for them in the beginning months anyway. (Learn how to get rid of your subscription services without feeling the burn here.)
- Open a new, baby-only savings account, and start saving now: If you can, it’s not a bad idea to start funneling away some additional money each paycheck towards a new savings account geared specifically for Baby. For as much planning as you do, it’s always best to be prepared for any additional, surprise expenses that come up, and having a little cushion to help cover these things will help you feel better during stressful times.
Step 3: Gear up on baby goods
Here’s one area where new parents have the potential to go a little crazy — buying all kinds of new stuff for Baby. That’s where a baby shower can really help though, and if you’re lucky enough to have someone offer to throw you one, you should absolutely take her up on it, and then be strategic about the items you put on your baby registry.
A couple things to keep in mind:
- Heading out with someone you trust and who’s already a mom is always a good idea for the feedback and knowhow.
- Remember that just because a product looks cute or promises to work wonders for your kid doesn’t mean it’s actually necessary. In fact, you might want to check out this piece for five things to reconsider putting on your registry. Not all babies love bouncy swings, for example, so it might be worth borrowing one from a friend for a bit to see if your kid even takes to the swing before dishing out (or having someone else dish out) for a brand new one.
- Babies won’t need a ton of stuff in the beginning, so if you’re worried about space, it’s okay to scale back at first. Stock up on a car seat and stroller, diapers and wipes, a monitor, onesies and a bassinet or Pack ‘n Play to keep the baby in your room for a while, if that’s your plan (you can always get a crib later). Plus, if you’ll be breastfeeding, remember your pump could be free through health insurance, so check into that. Once you meet your little one and get to know him better, you can decide later if additional things would be necessary or helpful, like extra swings or activity sets, fancy products like a jogging stroller or bottle and wipes warmers, etc.
- Remember, most places offer discounts for items left on your registry that you want to purchase once your shower is over, so if there’s something you really want but you worry about putting it on your registry because it’s too much, you should still do so. That way, even if someone else doesn’t get it for you, you’ll still be eligible for the discount. Sign up for email newsletters and follow your favorite brands on social media, too, where they’ll be likely to share coupons and additional discounts with their customers.
Step 4: Consider your work options
Ah, work. Especially for women, there’s so much to consider when it comes to having a baby and a career. There are essentially two main things that you’ll need to figure out heading into parenthood when it comes to your job and your baby:
- How much maternity leave do you have? Unfortunately the U.S. is one of the few developed nations that hasn’t quite come around to fair and practical maternity leave policies — in other words, we have no set policies. For the most part, it’s up to each individual company to decide how to handle maternity (and paternity) leave with employees. What we do have is the Family and Medical Leave Act, which entitles all eligible employees to take up to 12 work weeks within a 12-month period of unpaid, job-protected leave for specified family and medical reasons (like the birth of a child) with continuation of group health insurance coverage under the same terms as if he or she had not taken leave. Find out if you’re eligible for FMLA here. Outside of that, it’ll be essential to sit down with your employer or HR rep to discuss how much additional paid leave you’re entitled to, and whether or not you can use saved vacation or personal days for maternity leave. Figuring out how much income you and your partner will have coming in during maternity leave will help you potentially budget for the length of time you’ll be able to take and how much additional money you should have saved up before baby comes, too.
- What are your plans for returning to work? For many women there is no real option — they simply can’t afford to not go back to work. For women with a little more wiggle room with their choices, though, there is a lot to consider before leaving a job to be a full-time mom. Childcare costs (which we talk about below) are often a big factor that comes into play when most women are deciding whether going back to work is even worth it, financially at least. If you’ve determined that you can afford to stay home financially, you’ll still need to consider:
- Where your health insurance will come from (can a spouse provide it for both you and the Baby?)
- How will you continue to save for retirement (you can read more about that, here)
- How to keep your foot in the door for your career should you decide to go back some day. If you plan to take classes or enroll in continuing education to do so, you should consider factoring those additional expenses into your budget.
Step 5: Take a look at childcare costs
If you’ll be heading back to work after baby (or you’re trying to determine whether it’s financially necessary to do so), it’ll be essential to take a look at your potential childcare costs. To help determine average costs in your area, check out the interactive map on ChildcareAware.org for specifics. In Colorado, for example (my home state), a married couple can expect infant, center-based care costs to average around $13,154 annually (or approximately $23,036 when you factor in a second child).
So, how can you potentially lower the costs of childcare? Here are some suggestions:
- Tag in Grandma and Grandpa (or any other friends and family willing to help): If you’re lucky enough to live in an area near family — and especially retired family, or family with flexible work schedules — it’s worth seeing if you can work out some kind of care situation whereby they look after your little one, even if only for a day or two a week. You’ll need to check with your primary caregiving source if you want to go this route, though, as some require payment for full weeks, months or even a year, regardless of whether your child is there every day of the week or not.
- Trim back additional costs: If your nursery or daycare charges extra for additional services like providing a meal or late pickup options, find out what those are up front and do everything you can to avoid paying for them.
- Check your FSA: A Flexible Spending Account is a special savings account sometimes offered through employee benefit packages. If you or your spouse has access to one, you may be able to save up to $5,000 per year, tax-free, which you can then use to cover daycare costs. (Learn more about an FSA here.)
- Consider alternative care options: While daycares and nannies are the most popular childcare options, there are other choices. For example, you could host an Au Pair at your house whose job would be to watch your kids in exchange for room and board, or you could consider a nanny share, where multiple families share one nanny and split the cost.
Step 6: Get additional paperwork in order
When you’re about to become a parent, there are all kinds of ‘grown up’ documents you’ll now need to have on your radar. Here are some of the most important ones to consider putting together right away:
A life insurance policy: Even if your employer offers one, it’s worth searching around to see if an outside provider might offer a broader range of coverage for competitive pricing. Remember that when it comes to life insurance, your main goal is to provide your family with the funds necessary to continue on with their lives should something happen to you (they might need money, for example, to pay off a house, put the kid through college, and just pay the day-to-day bills). There are many calculators online that can help you get an idea for how much estimated life insurance you might want to get coverage for, and about how much that might cost you per month but remember that how much you actually pay will be determined by a number of factors, including your overall health and lifestyle factors.
A will: When you don’t have a will, the fate of all your possessions and property will be left up to the law when you die, which is never something you’d want to have happen, but especially not when there are children involved. While there are plenty of DIY methods available to create your will, this isn’t necessarily an area where you want to skimp, and it’s best to make sure that everything is done properly and legally, so using an estate attorney is your best option. If that’s too costly, a legal online site (like LegalZoom) could be a backup, but those sites are really only helpful if your will is going to be simple and straightforward (as in you’re leaving everything to one person).
Another important aspect of your will is including guardians for your children. Ideally these will be people with whom you’ve discussed the arrangement ahead of time. Keep in mind you can also name two different types of guardians for your children — a guardian for their finances and one to actually look after their care — should you feel that’s necessary.
Short-term (and potentially long-term) disability coverage: Remember that you’re much more likely to fall ill or suffer from an injury that keeps you out of work for a while, so signing up for short-term disability coverage to keep those bills getting paid while you’re laid up is a good idea. Check with your employer to see what they offer, and read this piece for more on the different options available.
Step 7: Start looking at college savings options
While it might seem crazy to start thinking about saving for college before Baby is even born (and it certainly shouldn’t be your top priority, above everything else on this list), it never hurts to get a jump start thinking about this financial aspect, since it could be a hefty sum you’ll need or want to have saved.
College savings will be a personal thing you and your significant other will have to discuss — all parents must decide for themselves whether or not they want to pay for any, some or all college expenses for their kids, or if there will be some kind of limit they’ll put on their contributions, etc. Also keep in mind that most experts would recommend that saving the maximum amount you can for your own retirement plans should always come before socking away for your kid to go to college. As the old saying goes, you (or your kid) can always take out loans for school … you can’t do the same for retirement.
Having these discussions sooner rather than later will also help dictate exactly when and how much you start saving, since obviously the longer you invest, the more opportunity you have for your funds to grow.
- When it comes to actually saving, a 529 is the most traditional way that most parents decide to save (if you’re interested in sorting through your own 529 options, check out this piece about the five best 529 options), but that’s certainly not the only way to save. Some additional options include Coverdell Accounts, UGMA or UTMA Accounts and even Roth IRAs. (We covered each of these in length here.)
- After you’ve done your research and come up with a general idea of how much you’d like to save, and what vehicle (or vehicles) you’d like to save in, you’ll have a better idea of the timeline you’re looking at to start. Remember, additional products can help you save even more on the side, too (like the Upromise MasterCard by SallieMae, for example, or the Fidelity Rewards Visa Signature Card, which allows users to deposit rewards directly into their Fidelity managed 529 College Savings plan).
Of course this isn’t an exhaustive list of things you’ll need to have prepared for Baby (although it may feel exhaustive to read it), but prepping these items before the arrival of your bundle of joy will certainly help you feel more financially ready once she does get here.
Plus, if looking at this list scares you off, remember — you’ll have nine long months to get everything in order, which is plenty of time. Take it one day at a time, and you’ll be more than ready — both financially and emotionally — when Baby arrives.