When you decide to have a baby, it’s perfectly normal to feel a twinge of financial anxiety. I mean, it’s no secret that babies come with a few added expenses. The good news is that pregnancy takes 9 months, so you have plenty of time to get your financial life in order. The real question is, how do you financially prepare for a baby?
Well, in this article, I am going to address exactly that.
Now, just so we’re clear, as I’m writing this article, my 8-week-old baby girl is sleeping in her bassinet just a few feet away from me. So, the expenses that come with a newborn are fresh in my mind — and bank account. In other words, I’m not just making this up. My wife and I have spent the last year financially preparing for a baby, and I’m hoping our experience will be of benefit to you.
So, without further ado, — and as I’m quietly serenaded by the cute sounds of a sleeping, pooping baby — here are 11 practical tips to financially prepare for a baby.
1. Start A Budget
By far, the most important first step you can take when you are financially preparing for a baby, is to start living on a budget. And I’m not talking about a theoretical budget that exists in your mind. No, I’m talking about a written (or typed) budget that you can log expenses into every single day.
Your budget can be anything from a spreadsheet to a hand-written budget, or you can check out the EveryDollar app.
Regardless of what method you choose, a well-defined budget will help you make significantly better financial decisions through the baby preparation process. And on top of that, it will help you plan your expenses to a tee, and define an exact number that you need to save.
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2. Pay Off Debt (If You Aren’t Pregnant Yet)
If you want to make your financial life significantly easier — and you are still trying to get pregnant — pay off as much debt as you possibly can. Debt makes everything much more difficult.
Seriously, can you imagine how easy your financial life would be (even with a new baby) if you didn’t have to make a single debt payment anymore?
My wife and I were blessed to have the opportunity to get out of debt before she got pregnant, and it was the best financial decision we have ever made. Though, I will say it wasn’t easy. It took months of hard work, budgeting, and saying ‘no’ to spending money on many things we enjoy. But, let me tell you, I have never been happier to be debt-free than the moment when we found out we were going to have a baby.
Now, just so we’re clear, when I say get out of debt, I am talking about consumer debt, meaning any debt other than your mortgage. (i.e. Credit cards, student loans, car loans, personal loans, etc.)
My wife and I are renters, so we don’t have a mortgage. But, if you do, I’m not suggesting that you hold off on trying to have a baby until you pay off your house. In fact, I’m not even suggesting that you hold off on having a baby at all. Babies are the biggest blessing on this earth, and if you and your spouse are ready to have one, then go for it, regardless of debt.
All I’m saying is that paying off your debt makes the financial aspect of parenthood a lot easier. So, while you are trying, do your best to pay off as much debt as possible. But, when you find out you’re pregnant, it’s a good idea to hit pause on paying extra towards debt, because that is the time to start saving.
3. Crunch The Numbers
Before you get too far into pregnancy, you should take some time and crunch some numbers. I mean, over the next 9 months or so, you are going to have a number of expenses that you need to be prepared for. For example, you will need more than likely need to buy maternity clothes, nursery furniture, diapers, wipes, baby clothes, bottles, a breast pump, and much more. Additionally, you will have medical bills for mom and baby, as well as a new baby on your health insurance plan.
So, get out your calculator, do some research, and figure out how much everything is going to cost. Then, once you do, I recommend adding about 50% more to your total number. I know, that might seem excessive. But, it’s amazing how many little expenses you will run into throughout pregnancy, and it’s in your best interest to overestimate how much you need to save.
4. Pile Up Cash
Ok, so now that you have crunched all the numbers and you have a savings goal in mind, you need to start piling up cash. This is particularly important if you are going to take an unpaid maternity leave.
The last thing you want to do is give birth without a good amount of savings in the bank. So, cut any expenses you don’t need, and track your spending religiously to make sure you aren’t letting money slip through the cracks.
You have nine months to save for this baby, so take advantage of it.
5. Be Patient
I know, in the last section I said you only have 9 months to save. On the other hand, 9 months is a long time to wait. And when you are waiting for a baby, it is easy to go a little crazy on baby stuff.
Seriously, when you have to wait 9 months, it’s hard to look at baby furniture and not buy it. But, you don’t have to own every single baby item known to man before your baby is born. In fact, I would advise against that.
Rather, you should take the whole nine months, and be as patient as possible. Sure, there are things you need to buy before your baby is born, but focus on the absolute essentials. For example, you are going to need a bassinet, swaddles, a carseat and stroller, diapers, wipes, and newborn baby clothes, and a few other things.
Other than that, I highly recommend buying a lot of stuff after your baby is born. That way, you will know what you really need, what you really don’t, and what would be nice to have.
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6. Start A Side Hustle
I can’t recommend this enough. If you want to improve your financial situation and financially prepare for a baby, an added stream of income is really nice to have.
This doesn’t have to be anything complex. You could start a blog, an etsy store, or a virtual assistant business. Even if it only makes a couple hundred bucks a month, it can make a huge impact on your financial life with a new baby.
7. Don’t Overspend On Baby Stuff
Earlier, I talked about exercising patience and holding off on buying tons of baby stuff during pregnancy. In addition, you should try to avoid overspending on baby stuff. In particular, there is no reason for you to overspend on baby clothes, and baby toys.
For example, when my wife was 8 months pregnant, she went shopping for baby clothes at Once Upon A Child, and bought 21 baby outfits for less than $60. What’s funny is that a couple days later, we found one of the same outfits at Dillards for $35. Like I said, there’s no reason you should overspend on baby clothes.
Side note: if you check Facebook Marketplace, Craigslist, or Ebay, you can find all sorts of baby items for pennies on the dollar.
8. Plan For Child Care
According to a study done by the Economic Policy Institute, child care costs in America can range from $4,000 – $23,000 per year, depending on the state. (source) So, if you are planning to go back to work after you have your baby, you should figure out how much your child care costs will be and start saving.
This is a major aspect of financially preparing for a baby, so don’t forget to plan for it.
9. Get Term Life Insurance
As hard and uncomfortable as it might be to talk about it, you need to get term life insurance as a parent. It is such a small price to pay in order to protect your family in the event that you pass away.
The good news is, term life insurance doesn’t cost very much. In fact, my wife and I pay less than $50 per month, combined, for ours.
This is one of the most important things you can do for your family. And, it should be at the top of your list when financially preparing for a baby.
10. Figure Out Your Baby’s Health Insurance
When your baby is born, you will have 30 days to enroll him or her in a health insurance plan. Now, if you are insured through your employer, this is as easy as talking to HR and adding your baby to your policy.
However, if you are individually insured, you will likely need to get your baby enrolled in an infant health insurance plan. This isn’t very difficult, but you should do as much research as possible before your baby is born.
I can tell you from personal experience that researching health insurance plans while holding a screaming baby is less than ideal. So, if at all possible, get everything ready to go before your baby is born.
11. Start Thinking About College
College is one of the most expensive, and financially burdening experiences a person can go through in America. Just ask anybody that’s buried in student loans.
The good news is, if you start financially preparing for your child’s future education, they won’t even need to flirt with the idea of student loan debt. All you have to do is set up a 529 Plan, and start investing in it monthly.
The best part is that your money will grow tax-free.
If you ask me, that is one of the most wonderful gifts you can give your child.
Babies are one of the best blessings on the planet. But, there’s no two ways about it, they come with quite a few expenses. The good news is that it only takes a few small steps to financially prepare for a baby.
From getting on a budget to saving for maternity leave, and even starting a college fund, it is in your best financial interest to get your finances ready for your little bundle of joy.
How are you financially preparing for a baby? Be sure to leave a comment below.
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