It is no secret that having a baby is a life-changing experience. Every aspect of your life will be altered, especially how you spend and save money. A BabyCenter survey found that 42 percent of parents expect to spend around $10,000 in their first year alone! WOW!!! Creating a budget before your baby comes home is vital to your financial well-being.
With some forethought and careful budgeting, you and your family can moderate some of the costs associated with the first year of your baby’s life. While no one can tell you how much to save before your baby comes home, being proactive will minimize surprises and increase peace-of-mind and enjoyment when your beautiful new addition arrives.
SAVING AND BUDGETING FOR A NEW BABY
Labor and delivery costs vary wildly. Location is a significant factor in how much you will spend. Depending on where you are in the country and where you choose to give birth can alter your plans and budget.
According to the U.S. Agency for Healthcare Research and Quality (AHRQ), the average cost of a normal (no C-section or complications) birth in a hospital is around $3,200. Add in the costs of pre and postnatal care, you’re looking at an additional $4,000 (or more) added to your hospital bill, and this is after insurance. If there are any kinds of complications, such as low birth weight or jaundice, you can realistically expect to pay more.
When you find out you’re pregnant, contact your insurance company to find out what kind of coverage you have and if you have it, what your HSA or FSA will cover. If your insurance is through your employer, reach out to Human Resources. You will likely be having several conversations in his or her office, especially if you’re going to take maternity or paternity leave.
Taking Time Off
Finding out what kind of family leave your company offers (or doesn’t offer) is going to affect your budget. It may be surprising, but only about one-third of all working women in the United States receive maternity leave. If your company provides maternity or paternity leave, find out if you get the full amount or only a percentage of your regular paycheck. This may affect how long you take or even if you return to work.
If your company doesn’t provide leave, they may still be required to honor 12 weeks, unpaid, under FMLA law. Fully understanding your benefits will give you a better idea of how to create a workable budget for you and your growing family.
Budgeting For Baby
Once you have a clear idea of how much money will be coming in, you can begin creating a budget for the months leading up to, and after, giving birth. Use a ‘first-year’ calculator to figure out what you’ll need to save. The numbers may surprise you so expect to make some adjustments in your spending. Curious about how to start making some cuts?
Start by figuring out where your money is going now. Track your expenses in Excel or if you’re more comfortable on your phone or the computer, try using an app/program like You Need A Budget.
Once you’ve figured out where your money is going, create a budget with savings in mind. More importantly, start that budget before the baby is born and stick to it! Look at your spending carefully. Now might be the time to cut out unnecessary expenses like cable or magazine subscriptions. Limit your travel and avoid eating out too often. Packing a lunch, instead of ordering a sandwich, can add up quickly. Small changes can free up money in your budget to cover the additional costs you will have once you bring your baby home.
Buying For Baby
Buying furniture and supplies as you prepare your home for your little one is where a lot of families tend to blow their budgets. First-time parents are often unsure about what and how much they will need to care for their newborn. Before you build a registry or go on a shopping spree, have an honest conversation with your partner, yourself and other parents about what’s truly necessary.
Bring a parent on your registry trip as the will give you the lowdown on strategic purchases and can assist your internal debate between that fancy baby Jacuzzi or $10 plastic tub. That doesn’t mean you can’t splurge on something adorable you love. Just call a splurge a splurge, save for it and buy other things you need right now.
Don’t buy anything without seeing what your friends or family members are willing to lend or give you for free. Some babies grow so fast that they never get the chance to wear their newborn outfits or onesies. The same can be said for items like gliders or high chairs. Your baby may not like a high chair, and you use a booster instead. That can be money wasted.
There is also no need to buy brand new items for your baby. Purchasing gently used clothing, furniture and supplies can save you a lot of money over time. Also, consider registering or buying gender-neutral clothing and equipment. If you plan on having more children, you won’t feel pressured to buy new things.
Lastly, if you’re planning on using daycare, the sooner you can start interviewing centers or home care candidates, the better. Some have an admissions process, waiting lists or deposits so if you have a specific person or location in mind, schedule your visit well before your due date.
With prudence and planning, you’ll feel more confident about bringing your baby home.