Having a baby is an exciting time! As you prepare to bring new life into this world, you may be thinking, how can your finances keep up? Babies are famous for being pricey. Besides the actual delivery of the baby (which can cost between an average of $5,000 to $11,000) raising that child for another 18 years minimum is even more expensive (the estimated average cost of raising a child is $272,049 for 2022).

That is why it is so important to not only prepare yourself physically and emotionally for a newborn, but also financially too! While everyone likes to plan for their newborn in their own way, structure is key when it comes to organization. You can easily break down the preparation of your finances before you have the baby!

How to Get Your Finances Ready for a Newborn?

Like we said earlier, everyone can prepare their finances in their own way. The best way for you to handle your financial situation depends on what you are dealing with! Some preparation tips to consider for your finances includes:

• Talk About Money with Your Partner
• Make a New Budget
• Consider Insurance Coverage

Talk About Money with Your Partner

While it’s important to be on the same page with your partner before you have a baby, it’s especially important now! With a baby on the way, you want to make sure you two are on the same page. You will want to have a clear understanding of your expectations for your child. While these expectations can change, it is important to have a solid foundation. Some things that you can talk about include:

• How will the work situation look? Is someone staying home as a parent full-time or are both parents working? How will you handle any costs of childcare?
• Do you plan on paying for your child’s college education?
• Are there things that you want your child to experience? For example, you may want your child to take swimming lessons at 6 months old, or to go to camp when they are old enough.

Making sure that you are on the same page with these topics with your partner can help you better prepare currently and help avoid disagreements down the line. If your partner isn’t in the picture then you will want to have this talk with someone who is helping you financially or by yourself.

Make a New Budget

Now that you have had a talk about expectations, you can begin to plan your money. You will want to think about new costs that you will be responsible for like a hospital payment, baby clothes, diapers, baby accessories, and more. It’s also important to update your existing budget. Right now, you may put money aside to go out to eat every week. When you have a newborn, you will likely not have the time or energy to do this. Instead of spending your money on going out to eat, you will want to plan for handling child care expenses!

Some of the most important parts of your budget to consider is how much:

• Health care costs will be for delivering the baby
• You will need to plan for being off work
• You spend on baby items like onesies, a car seat, a crib, baby blankets, bottles, diapers, etc.

Work on Your Emergency Fund

While it is never fun to think about the worst case scenario, it is important to make sure you are prepared for emergencies. A part of planning your budget is making sure that you have enough money put aside for your emergency fund. A good rule of thumb is to have between 3 to 6 months of your current expenses saved up. For example, if you spend $3,000 every month, then you will want to have between $9,000 to $18,000 saved in case of an emergency. This can help you in times where you need it the most!

Think Both Long and Short Term

You will also want to account for both your long term and short term goals. Besides keeping this in mind for your child, you will also want to make sure you focus on your financial goals as well. This can mean keeping up with your retirement account, paying off debt, etc.

Consider Insurance Coverage

There are a variety of different types of insurance that you will want to think about when getting ready for a new baby. Besides updating your auto policy to consider your child in the car, you will want to consider:

• Disability Insurance
• Health Insurance
• Home Insurance
• Life Insurance

Disability Insurance

As a general rule of thumb, anything that is seen as optional is not normally covered with disability insurance. That means if you choose to stay home during or after your pregnancy then you may not be eligible for disability benefits. However, if there are complications during or after pregnancy that result in you being unable to work then you may be eligible for disability benefits. While generally this is the case, there are expectations! Some disability group plans (offered by employers) consider pregnancy as a qualifying condition for disability benefits.

Usually short-term disability insurance plans are offered by employers and can help replace a part of your paycheck if you can’t work. Generally this coverage is for up to a year! As long as you have certification from a doctor stating that you cannot work due to your pregnancy, then you may be able to receive some coverage. Not every policy is the same so if this is something that covers you through your workplace you will want to confirm the details with your employer.

Health Insurance

Once you have your baby, they will be automatically covered by your current health insurance plan for the first 30 days of life. After that, you have 2 options when it comes to insuring your newborn. You can either add your child to your existing health insurance plan or get a new plan all together.

Luckily, the birth of your child counts as a qualifying event. This means that you have 60 days from the date of the qualifying event to get an insurance plan (if you don’t currently have one) or to change your plan. There are a variety of health insurance plans and coverage options that you will want to consider when it comes time to make sure both parents and the child are properly insured!

Home Insurance

If you are a homeowner but currently don’t have homeowner’s insurance then you will want to consider this option. Your home will be where you raise your child. That is why you want to be prepared in case of any emergency! A proper homeowner policy will cover your family’s belongings, your home, and any liability in case someone gets injured on your property.

Life Insurance

The idea of dying can be unsettling for many people. However, it is important that your end-of-life situation is handled. A life insurance policy can provide protection for your family in case you die. There are a variety of life insurance policies but generally they can help your family by supplementing your income.

Other Tips to Consider

Besides some of the ways you can prepare your finances above, there are some other tips that you can keep in mind that may also be able to help your finances:

• Look Into Government Programs
• Start Coupon Clipping
• Consider Homemade Baby Food
• Benefit from the Child Tax Credit

Look Into Government Programs

Not everyone is in the best position by the time they are having children. That’s why the government may be able to help! There are a variety of assistance opportunities that can help like:

• Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
• Child and Adult Care Food Program (CACFP)
• Housing Choice Voucher Program
• Low Income Home Energy Assistance Program (LIHEAP)

Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)

This program can help low-income women, infants, and children up to the age of 5 years old (who face a nutritional risk). WIC provides foods full of nutrition to help supplement diets. The program can also give out information about healthy eating, and even provide referrals to health care.

Child and Adult Care Food Program (CACFP)

This federal program can provide food like snacks and meals to qualifying children and adults that are enrolled in eligible centers. Specifically for children, eligible centers would include child care centers, day care homes, etc. CACFP also gives reimbursements for meals that are served to youth that are a part of after school care programs, and children that are in emergency shelters.

Housing Choice Voucher Program

Also known as section 8, this program can give eligible recipients housing vouchers to go towards the cost of housing. The amount that these vouchers will be varies based on income level and family size but can help people get affordable housing. Sadly, these vouchers cannot be used at any property. They can only be used at properties that accept them as a form of payment.

Low Income Home Energy Assistance Program (LIHEAP)

Energy costs can be hard to deal with for many families struggling with financial hardship. LIHEAP aims to help with these costs by providing support with home energy bills, energy emergencies, weatherization of the home, and minor home repairs that are energy-related.

Start Coupon Clipping

While you don’t need to be an extreme couponer, your finances can benefit when you get a deal! For example, if you can save $1 on meat at the grocery store every week, then you may be able to save $4 a month. After a whole year you could save $48 which may not seem like a lot but can make a difference!

You may also want to develop a daily (or regular) habit of going through the newspapers or mail to look for coupons. Many stores that sell baby products could have great offers, with discounts like 30%-50% off. This is an option that you definitely want to explore.

Consider Homemade Baby Food

As an infant, the one of the best “homemade” baby foods would be breast milk. Unlike formulas, it is free! However, breastfeeding may not be the best option for every mother. If that’s the case then you will need formula in the meantime (which you shouldn’t make homemade). Once your baby is ready to eat soft food, you may benefit from homemade baby food. There are plenty of recipes online and there are even products that help you make some! This may be able to help you save.

Benefit from the Child Tax Credit

One financial benefit to having children is that you will likely be able to qualify for the Child Tax Credit. This tax credit program can reduce the amount of tax you owe by $1,000 for each eligible child that’s younger than 17 years old. The child must be related either as a:

• Son
• Daughter
• Brother
• Sister
• Stepbrother
• Stepsister
• Descendants of any of them (like a grandchild, nephew, niece, etc.)
• Adopted child

Overall

It can be stressful to think about your finances as you get ready for your newborn. There are plenty of tips that you can consider that may be able to help like:

• Talk About Money with Your Partner
• Make a New Budget
• Consider Insurance Coverage

Besides these tips to prepare your finances, you may benefit from other tips like:

• Look Into Government Programs
• Start Coupon Clipping
• Consider Homemade Baby Food
• Benefit from the Child Tax Credit

Not every piece of advice can help your situation. However, it is important to consider a variety of options to help you get the right plan together. If you have any questions on how you should handle your finances for your newborn you should get in touch with a professional like a personal banker. They can help make sure that your finances are fully prepared for your baby’s arrival. Take your time, and you will find that your finances don’t need to be as stressful as they may seem as long as you take the steps to prepare!