5 Tips to Financially Plan for Parenthood

While having a baby is a cause for joy and celebration, this event also tends to bring about varying levels of stress and worry, especially for first-time parents. With the mountains of expenses that accumulate in having a baby, many parents do not feel financially prepared to raise a child and provide for a family. To avoid feeling overwhelmed, It is best to take some time to discuss a financial plan with your spouse or significant other before the baby comes. This way, you can prepare to bring a child into your life without worry, and prioritize those precious moments caring for your baby when the day comes. In today’s especially uncertain times of COVID-19, there is no time to waste in getting financially ready for the possibilities that could happen in the future. To help you get started, here are 5 tips on how to best manage your finances as you prepare for having a baby.

1. Plan for time off from work

Even with a due date in sight, babies often arrive unexpectedly. For both parents, planning in advance to take time off of work is crucial for caring for the new baby, whether you plan to return to work after parental leave, or choose to be a stay at home parent. Unfortunately for new parents, the U.S. receives very low rankings among countries that provide paid maternity leave. While there is no federally mandated paid leave, other leave benefits and programs exist that are determined by each state. Your place of work can also affect your ability to obtain parental leave, as individuals who hold higher paying jobs have a greater chance of receiving parental leave benefits. With this in mind, it is important to research what kind of paid parental leave, if any, is offered by both your state and place of employment. 

In the case of unpaid parental leave, however, the Family and Medical Leave Act is mandatory for eligible employees of all public and many private agencies. This policy allows the parent to take 12 weeks of unpaid, job-secure leave within a 12 month period. Because payment is not secured or guaranteed during this time, it is also essential to plan out your budget and living expenses in advance.

2. Choose your childcare

If your household will not have a stay-at-home parent, you will need to consider the issue of childcare when you eventually return to work. If possible, working remotely can provide unique benefits in which you may not need as much childcare, or be able to avoid the need entirely by balancing work and baby needs between you and your partner. This arrangement may take more careful planning to work for shorter periods of time or when your baby sleeps, but if your spouse or partner will also be home, it will be easier to plan a work and baby schedule between the two of you.

Whether you work from home or outside it, in light of the risks of COVID-19 and constantly changing state regulations, it may be safer and easier for you to take care of your baby at home. For many families, relatives or grandparents of the baby who live close by often fill the role of babysitter when the parents need to go to work, or when they need some time to be more intentional and productive in working from home. In this way, health risks are minimized by keeping the baby at home and in contact with only a few trusted family members, which can also provide a safer place for your at-risk relatives to stay and watch the baby.

Though family members can provide ideal childcare, it is not a suitable option for families who hold jobs that require them to return to work, or who do not have any family in the area who are available to help. If you must turn to another form of childcare, it will be crucial to do proper research of health and safety guidelines of care centers and employees in order to place your child somewhere where you are assured of their safety. For many families who leave home to work, daycare is the most common option of childcare, and also one of the most expensive, with the average cost resting around $1,230 per month for infants. However, you can potentially reduce the high cost of daycare centers by getting on a waiting list as soon as possible, as well as considering cheaper options like at-home and church-based daycares.

If you are not comfortable with the idea of taking your child outside the home so often, there is still the option of hiring a nanny or babysitter. With the current COVID-19 risks, it is crucial to carefully choose an applicant for this position. Trustworthy recommendations from friends and family can make this process a bit easier and asking important questions upfront and enforcing health and safety practices can help you find a suitable nanny for your baby.

Finally, if childcare is largely unaffordable for you, investigating existing state assistance programs can provide you with some relief and funds necessary to give your child the care they need.

3. Budget diligently

In the days leading up to birth, you may have received many gifts from family members and friends to provide you with essential baby items, however, once the baby comes this supply will quickly run out. Budgeting early can help you prepare for these new expenses. With the exception of stay-at-home parents, childcare will likely take up a large portion of your baby expenses. The rest will likely consist of supplies such as food, diapers, and clothes which can still be challenging to work into an already existing budget based around rent or mortgage, utility bills, car payments, and more. You may want to take time now to cut out certain expenses or decrease spending in other areas in order to have a financial cushion as you make room for a longer budget list in the near future.

4. Build up funds for the future

While budgets help you plan for your anticipated expenses, unexpected situations can happen at any time. Whether it’s a medical issue or natural disaster, there is never a reason too trivial to justify having an emergency fund, especially when caring for a baby. Experts recommend setting aside at least 3 to 6 months of expenses in such a fund, however, you should always evaluate your specific situation and determine whether it would be better to increase that amount. Ideally, this money will allow you to avoid getting into a tight spot and keep you from going into credit card debt, if such a situation were to occur.

If you’d like to start early, you can also establish a college fund for your child, even when they are a baby. A 529 college savings plan allows you to build up this fund over many years and cannot be accessed until your child goes to college in order to be used toward tuition, room and board, and other related costs. Most states offer their own version of this savings plan and many also provide state tax breaks to those who open and continuously pay into such an account. If this is something you want to start early in your child’s life, a this plan is a great place to start.

5. Get your insurance in order

Whether you have a child or not, insurance can eliminate much financial burden in different areas of your life. However, once you decide to start a family, you may want to consider other types of insurance that would benefit you in this new stage of life.

Health insurance is a must, especially if you plan to give birth in a hospital, as the medical bills from a hospital birth can be exorbitantly high, not including all the follow up visits in the next year. After the birth, don’t forget to add the baby to your health insurance, especially during the grade period which is generally 30 days. If you do not currently have health care, don’t waste any time and start shopping around for a plan. If necessary, it is also possible to obtain health insurance even while you are pregnant.

If your recovery after childbirth requires a longer period of time away from work, consider getting short term disability insurance, which will provide a source of income for a fixed amount of time. Complications during and after pregnancy are not uncommon, and this insurance  Since most states and not all employers don’t offer this type of insurance, you may have to take out a policy from your own insurance company.

Finally, life insurance is the best way to provide for your family members in the unfortunate case that one parent passes away. Although it is a situation many don’t want to think about, investing in life insurance can provide financial security that has become even more necessary with the birth of a child. While more men tend to have life insurance, you may also want to consider taking out life insurance for the mother to be, even before she is pregnant. Life insurance builds up a fund that can be used at the time of death of the policyholder, but the conditions can vary. A pricey but reliable option is whole life insurance, which builds real cash value over the entire time the policyholder is living. This money can even be taken out and used before death ~ For most people, term insurance is much more viable and affordable, in which the policyholder pays a monthly premium for a set term of generally 10-20 years. After this policy expires, however, the money is lost and the family will have to take out another policy if they would like to continue that protection. With either type of plan, life insurance guarantees valuable financial protection for your family members so you don’t have to worry about their future.

Secure a lifelong financial plan with life insurance

Through all of the excitement, worry, and change a baby can bring, the feeling of holding him or her in your arms will make it all worth it. As you prepare for your baby’s arrival, take time to consider how life insurance could benefit your family by promising future financial security. At LifeQuote, we offer both term and whole life insurance policies that can fit your needs. Sifting through mountains of information can be a daunting task, but you may find that life insurance is more affordable and necessary than you originally thought. Additionally, in today’s climate it’s understandable to be wary about current health risks regarding COVID-19, especially with a baby coming. For this reason, we also offer policies that do not require a medical exam and can conveniently be applied for from the comfort of your home. You don’t have to sacrifice your safety for financial security, especially when caring for a baby. Contact us today for a free quote and start the journey in your new family life.