Those who are planning for parenthood have a lot to look forward to. But along with anticipating newborn coos and baby smiles, they should also be preparing their baby budget.
“Having a baby is a beautiful, joyful, and often expensive endeavor,” says Ashlee Neuman, a senior editor for The Bump.
With the right preparation, however, you can get your finances in shape and plan for your baby on a budget. Here’s a month-by-month financial guide to prepare for parenthood.
Month 1: Research your health insurance coverage
If you’re planning to conceive or are newly expecting, learn how your insurance covers maternity costs. “Now’s the time to read up on what’s covered under your insurance policy and what’s not, like screening tests, vitamins, doulas, and more,” says Neuman.
Research your plan’s maternity coverage
For companies with 15 or more full-time employees, the employer-sponsored health insurance plans must include maternity coverage, Neuman says.
“What’s specifically covered by your insurance will vary based on your insurance carrier and your plan, but you can expect anywhere between 25 and 90 percent of costs to be covered,” she adds.
It’s possible your insurance plan might not cover maternity costs at all. “If you have an individual insurance policy that’s not offered through an employer, odds are it won’t cover maternity costs,” Neuman points out.
Switch to a health plan that covers more costs
If your current plan is lackluster, consider making a switch during your employer’s next open enrollment period for insurance. It’s possible that switching to an HMO or “pay now” model of health insurance could save you thousands.
With my second baby, my husband and I made the switch knowing that I’d have some major health costs coming up. While some of our copays were higher, I had a much lower deductible on my health costs. I was even more grateful for the savings when my newborn spiked a fever and had to be admitted to the hospital for a week.
Month 2: Calculate out-of-pocket health costs
There are plenty of expenses that come with a baby, but your health costs will be some of the biggest — and the ones that you’ll encounter first.
Now that you have an idea of what your health plan will cover and what it won’t, you can start budgeting and saving for your maternity care.
Budget for prenatal care
Prenatal care will include plenty of check-ups, as well as a lot of lab tests, ultrasounds, and other diagnostics services. You’ll also want to pick an OB-GYN that you can trust and is in-network.
Look at what you’ll be responsible for paying out-of-pocket at each visit or for each test. Work these costs into your budget to make sure you can cover them.
Start saving for labor and delivery
You’ll also want to start researching and comparing the costs and services of hospitals at which you could deliver. Labor and delivery are typically the biggest medical expense of having a baby.
“Don’t be afraid to ask hospitals what they charge for delivery and postnatal care, and opt for in-network facilities to avoid out-of-pocket expenses,” Neuman says. “The good news is you have time to shop around for competitive rates.”
But remember, “Exactly how much you’ll pay depends on where you live, what insurance you have, and if any complications arise,” says Neuman. Average costs for a vaginal delivery are $8,775 and even more for a cesarean section, though costs vary widely by location.
Month 3: Scale back expenses
Once you know what costs you’ll be facing right away, it’s smart to review your spending and baby budget. Your lifestyle will change radically when you become a parent. Cutting back on spending now can ease the transition to parenthood.
A great place to start is by looking for ways to spend less on fixed monthly costs like rent, utilities, and debt payments. You can cut out some of these recurring costs if they’re unnecessary, like canceling the cable bill or downgrading to a cheaper package.
You can also look for non-necessities that you’re overspending on. Cut back on nights out on the town (this is easy when you’re pregnant and can’t drink anyway). Skip a hair trim or color. Stick with your current smartphone rather than upgrading to the newest model.
Month 4: Save as much as you can
After trimming your budget, start socking away the extra funds in your budget. You’ll need that money in the coming months to cover everything from bottles and diapers to your loss of income during your maternity leave.
With my first child, I also knew we’d also need a bigger place than our one-bedroom apartment, so I added an apartment deposit to my budget as well. With parenthood on the horizon, other parents-to-be might want to save up for a down payment on a more child-friendly car or start beefing up an emergency fund.
You don’t have to have everything figured out at this point, but estimating your future costs and how much you need to start saving for a baby can keep you on track.
Month 5: Plan for parental leave
By now, everyone’s probably heard the news about your new arrival. One of the questions I got most often was what my job plans were once the baby arrived.
How much time was I taking off? How early was I going to start maternity leave? Was my husband going to take time off to be with the baby?
Knowing what I could plan on made it easier to weigh my options and figure out what would be best for my family.
Know your rights as a new parent
“It’s never too early to brush up on your employer’s parental leave policies and your rights under the Family and Medical Leave Act,” Neuman says. Under the FMLA, both parents are entitled to up to 12 weeks of unpaid job protection if you work for a company with 50 employees or more.
As a California resident, I was also entitled to benefits through the state’s Paid Family Leave insurance program and I could take an additional six weeks of maternal disability leave. Make sure to check your state to see if it offers any additional benefits or protections for new parents.
Meet with your human resources department
You’ll also want to review your company’s policies and benefits for parents, as well as meet with human resources to discuss them. Make sure to ask if they offer any paid parental leave or what kind of parent-friendly policies they have in place.
“Figure out how much paid time off you’re entitled to and whether you’ll be taking any unpaid leave so you can start budgeting and saving well in advance,” Neuman suggests.
Month 6: Take out insurance policies
Parenthood is a huge responsibility. With a new life counting on you, it’s important to make sure your child will be provided for no matter what. That’s why Neuman suggests that expecting parents take out life insurance policies.
“As for how large a policy to get, most financial experts recommend eight to 10 times your annual salary — although depending on your circumstances, you may want to up that amount,” she suggests.
Expectant parents might also benefit from holding disability insurance, “in case you find yourself unable to work for a while,” Neuman adds.
You might have life insurance or disability insurance (or both) through your employer. “Expectant parents should take a look at their benefits to determine whether the amount would be enough to get you through several months without income,” Neuman says.
Month 7: Start looking and budgeting for childcare
By now you probably have an idea of how long you plan to stay home with your child, and if you’ll need childcare to return to work. “Plenty of parents expect to take on childcare costs, but many may not realize just how expensive it can be,” Neuman says.
Start looking at childcare in your area. Depending on where you live, you might need to claim your spot on a waiting list well before your baby arrives.
You can also get an idea of the costs you’ll be facing and start carving out room for this expense in your post-baby budget. “In most states, daycare center fees equal more than 10 percent of a two-parent family’s income,” Neuman says.
When planning for childcare costs, you can also revisit your work benefits to see if any can help with covering childcare costs. My husband’s employers offered an FSA for childcare, for instance, allowing us to save by paying for daycare with pretax dollars.
Set up a post-baby budget
You’ve already made some adjustments to your budget, but this is a good time to revisit it and make sure you’re accounting for all your costs.
“The average middle-income family spends about $12,000 on child-related expenses in baby’s first year of life, according to a 2010 report from the US Department of Agriculture — and for many, that number is even higher,” Neuman says. In general, you should be budgeting for at least $1,000 in extra costs each month.
If you’re not sure how much to save for a baby, do your research! “There are several tools out there to help families figure out what they’ll need to budget for, like The Bump’s Baby Budget Checklist, which breaks down one-time and monthly expenses parents should plan on,” Neuman adds.
Month 8: Start stocking up
You’ve reached the stage where friends and family members are starting to feel generous. Don’t be shy about expecting help from people who want to help you in this big life change.
If you haven’t set up a baby registry already, now’s the time to do so. After your baby shower takes place, you can fill in the gaps. Some retailers, like Amazon and Target, will give you a discount when you purchase items from your baby registry.
Know what’s a must-have and what’s not
Even if you get a discount, you should be choosy about what you buy.
“There’s a long list of baby gear you’d be smart to invest in — and then there are products you can safely skip,” Neuman says. Expectant parents can feel free to skip items of convenience but not necessity, like nursing pillows, bottle sterilizers, and bottle warmers.
“To get the most bang for your buck, choose items that are versatile and can grow with baby,” Neuman adds. Look for creative ways to reuse or repurpose items as baby grows. For instance, she says, “There’s no need for a changing table when a regular dresser with a changing pad on top will do!”
Month 9: Welcome baby
Now that your baby’s arrival is imminent, all the preparation you’ve been doing will pay off — but there are still some things you will need to do.
Finalize your paid leave and cash out vacation days
If your employer or your state provides paid family leave, set everything up now to ensure you’re taking full advantage of these benefits. Post-baby life will be so hectic that you can easily forget to follow up on important items like these — make sure everything is in place now so you can get the pay you are due.
Choose an in-network pediatrician
The last month of pregnancy is also a great time to find a pediatrician in your network. You can get recommendations and even meet with a few to discuss your parenting approach and find a good match.
Once your baby is born, you’ll also need to add your child to your health insurance. Many insurers have a strict window after birth during which you can add the baby to your coverage.
Get your baby’s birth certificate and Social Security card
Most hospitals will have a records specialist who will come by your room post-delivery. This person can help you fill out the forms for a birth certificate and a Social Security card for your new baby. You might need to pay a fee to file these documents.
Having a baby is definitely expensive and stressful, but it’s also one of the most rewarding experiences in life. By financially preparing for parenthood, you’ll ensure that you’re able to enjoy your new baby instead of stressing over money — and that’s priceless.
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