Preparing for Parenthood
Congratulations! You’re expecting! From the moment you announce your big news, you’ll likely get lots of advice from well-intentioned friends and family. They’ll offer tips on everything from dealing with sleepless nights and diaper-duty to calming a cranky newborn and searching for the best pediatrician. Suddenly, you’ll find yourself comparing the merits of one crib to another and mapping out a birth plan. While this time is exciting, it’s easy for information overload to set in!
First, take a breath. Many things will fight for your attention while you’re preparing to welcome your new baby, but while you’re choosing nursery colors, consider that the costs of raising a child are estimated at $20,000 per year and projected to be over $250,000 from birth to age 18, not including higher education costs. Raising children is expensive, but you can get off to a strong parenting start by prioritizing some important financial considerations.
Planning Before the Baby’s Arrival
- Health Insurance Costs for Mom – Prenatal care, labor, delivery and hospital stays may all incur copays or deductibles depending on your health insurance plan. Check your insurance coverage to get a better understanding of what you might be financially responsible for and include these predicted costs in your budget.
- Health Insurance for Baby – Make sure that you add your baby to your plan. Prior to delivery, research and interview pediatricians that are in-network. Some will want to visit your newborn in the hospital as they establish care and conduct a first exam. Once you are discharged from the hospital, you will begin visiting the pediatrician’s office on a frequent basis. Ask your insurance provider about what out-of-pocket costs will be your responsibility.
- Workplace Leave (Maternity and Paternity) – What leave time is available from your employer? What are your company’s policies? You may have paid leave time with extended unpaid leave available to you. Individual states may also have provisions that allow parents to take time off. For example, New York State Paid Family Leave allows for eligible employees to take up to 12 weeks of job-protected paid time off to bond with a new child. During that time an employee would receive 67% of pay, up to a cap of the current New York State Average Weekly Wage (NYSAWW). Currently, the NYSAWW is $1,688.19, which provides for a maximum weekly benefit of $1,131.08.
- Make a Budget – Will your income change? How will maternity or paternity leave impact your finances in the short and long term? Is one parent choosing not to return to the workplace? How will your expenses increase once your baby arrives? What are the new costs? Diapers? Nursery supplies? Will you be purchasing formula? Will you need daycare or in-home help? It can come as a surprise how quickly these expenses can add up when you’ve never had to include them in your spending plan. Create both pre-baby and post-baby budgets.
- Life Insurance and Disability Insurance – You will soon have a child relying on you for everything. If you or your partner were to become disabled or pass away, it’s important that you have prearranged for your family to continue to be cared for financially. Suitable life insurance and both short-term and long-term disability insurance policies can provide for their needs and ensure that the family’s finances are protected. You can speak with your insurance agent to determine the most appropriate policies for your needs.
- Emergency Fund – It is especially important for parents to establish an emergency fund so that you have easily accessible cash in the bank. A well-funded emergency account will give you peace of mind that you’ll have money available to cover any unexpected situations that might arise.
Planning After the Baby’s Arrival
- Obtain a Birth Certificate and Social Security Card – If you have an in-hospital delivery, they will provide you with the appropriate applications once your child is born. However, if you have a home birth, or for any reason don’t receive the necessary paperwork, you can contact your state’s office of vital records and your local Social Security office. Once you receive these official documents in the mail, make copies and keep the originals stored in a safe place. As your child grows, you will need them to travel and to register for things like school and even swimming lessons.
- Start a Savings Plan for the Baby – Your child was just born so the last thing you might be thinking of is college. But ask any parent of a college kid and they will tell you that time arrived much faster than they thought it would. Consider starting a 529 plan to save for future education expenses. According to The College Board, the current yearly cost of a 4-year public in-state school is $24,000 and private school is $55,000. In 18 years, these are estimated to increase to $40,000 and $90,000, which means that 4 years of college could easily cost between $150,000 to $400,000 or more.
- Update or Create Wills and Update Beneficiaries – If you already have a will, now is a good time to review and update it. If you don’t have a will, creating one will ensure that your wishes are followed in the event that you and/or your partner die. As a parent, your responsibility to take care of your child includes designating a guardian in your absence so that courts don’t have to. You should also take this time to check your beneficiary designations on insurance and retirement accounts and adjust accordingly.
- Continue Saving for Personal Financial Goals and Retirement – Right now your new baby is the star of the show, but you’ll want to continue working toward your family’s long-term financial goals. With your new addition, expenses will undoubtedly rise, but adjusting your budget will help keep you on track for your future.
When you’re getting ready for your baby’s arrival, the long list of things you need to do can be overwhelming, but with a little patience and planning you can set the groundwork for a bright future. If you have any questions, please feel free to contact us.
