Beyond the basic healthcare costs of pregnancy, prenatal appointments, and hospital birth, there is finding the right pediatrician and adding a dependent to your insurance. Of course, entering the world of parenthood can also cause couples to overspend because they don’t know which baby products they actually need. So, here are 10 money tips for parents-to-be that will hopefully provide some peace and clarity regarding finances.
10/10 Don’t Add More Debt
Whether you view debt as a tool to build wealth, or you feel burdened by it and work to live below your means, there are often certain reasons people give for overspending. Oftentimes, having a baby is used to justify going into debt because they are needs. Your baby needs a crib, they need a car seat, they need baby clothes, and they will grow very fast.
While there are basic needs that your baby will require, there are ways to avoid going into debt to make these purchases. Consider asking friends for baby products they no longer need, shopping at second-hand stores, or having a garage sale to get a little extra cash.
9/10 Most Expensive Isn’t Always Best
As a first-time parent, it can be easy to overspend on the necessities for your baby. However, it is important to remember that the most expensive baby product does not mean it’s the best. You can find baby strollers for over one thousand dollars or a couple of hundred dollars.
When it comes to car seats, all car seats sold in the United States need to pass federal safety standards. Therefore, there are ways to still purchase exactly what you need for your baby while sticking to a budget.
8/10 Think About What You Actually Need
The concept of minimalism may be something that sounded unenjoyable or daunting in the past. However, channeling your inner minimalist can be really helpful when it comes to planning for a new baby. There are so many products, toys, and extra items that are specifically marketed toward first-time parents.
When you are expecting your first child, emotions are running high, you don’t know exactly what you or your baby will need, and so you are more likely to overbuy and make purchases based on emotions. However, when you think about what you actually will need in those first few weeks and months of parenthood, it will help you avoid mindless spending. Plus, having a home that is less cluttered will help you focus on the simple bliss of the newborn stage.
7/10 Increase Your Emergency Fund
Most financial advisors will recommend saving an emergency fund of three to six months of expenses. This is a good rule of thumb to provide some stability and assurance in case something goes wrong. Maybe your car needs a new battery. Maybe the heater in your house broke, and it will be a couple of thousands in repairs. Or, there could be unexpected medical bills.
Simply having the cash to be able to cover your bills for half the year if there was an unexpected job loss or to fund these random life events that pop up will provide new parents with that much-needed sense of security.
6/10 Look Into Your Insurance
As a new or expecting parent, there are many priority shifts that occur, especially when it comes to insurance. Health insurance may change or go up during pregnancy and once your baby is born, they will likely need to be added as a dependent, which is typically a higher monthly expense and something to budget for.
There is a good chance that life insurance was not a priority for couples in the past. However, over half of U.S. households are dual-income. This means that they require both parents to work and bring home an income in order for their bills and lifestyle to be paid for. Therefore, life insurance may be something to consider in case a tragedy occurs, and one parent passes away.
5/10 Start A Savings Account For Your Baby
It can be hard to estimate the price that college will be eighteen years after your baby is born. It could be far more expensive or there could be much cheaper options available. However, having a savings account that is designated for your child’s future is an amazing thing to do.
Money provides people with options. Your baby might not even want to go to college once they graduate from high school but knowing that money wouldn’t be a limiting factor creates so much peace.
4/10 Create A New & Realistic Budget
The best way to avoid going into debt, remain financially stable, and actually build wealth is to create a realistic budget and stick to it. Since a new baby can bring many unexpected expenses into the picture, planning out each month’s budget will be really helpful.
For example, after all the necessities and bills are paid, how much money will be left over each month? How much will childcare cost? How much are diapers, formula, and baby food? Plus, budgeting for family fun and saving is important as well. Having all of these numbers organized will help keep your new family on track and thriving.
3/10 Plan For Parental Leave
Parental leave is so important for moms and dads. Having time to heal after childbirth and bond with your newborn is a very special time. The first priority is to check and see if your employer offers maternity or paternity leave. There are a variety of plans you could be offered but knowing your options and having a plan post-birth will be important. Some families choose to divide up the leave time between the parents.
For example, the mother may take the first twelve weeks off of work in order to recover and spend time with her baby. Then, when her maternity leave runs out, the father may start his paternity leave. This is a great option if employers offer flexibility since it can save families on childcare costs. However, some parents really want to be together in those first months, so they may choose to take their leave at the same time. Whatever the plan is, it will likely require some budgeting and so it’s important to think about it in advance.
2/10 Look Into Child Care Costs
Childcare costs are a major expense for families with young kids. It can actually become so costly that one parent chooses to stay home with their kids because most of their paycheck is simply covering daycare costs. The fact that it is cheaper to actually stop working outside the home in order to care for their children is crazy.
According to a recent Care.com Survey, the average family spends about 20% of their household income on childcare costs. Of course, if a family’s household income is on the lower end, childcare costs will be an even higher percentage of their take-home pay. On top of the financial burden, many families are struggling to find a daycare with open spots. It’s not unheard of to put your baby on a waitlist for daycare during the first trimester of pregnancy!
1/10 See What Tax Breaks You Qualify For
Most people dread it when tax season rolls around because it can feel so tedious. However, with a baby on the way, it’s not a bad idea to start looking at the different tax breaks your family could qualify for. For example, you will likely be able to deduct medical expenses related to pregnancy and collect the child tax credit.
Taking advantage of these will help cut costs and save money. Plus, knowing how much you are likely going to pay in taxes and accurately estimating what you will receive as a tax return will only help you create a more accurate budget throughout the year.
Sources: KFF, Consumer Reports, Magnify Money, Business Wire