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Starting a family is an exciting prospect, but one that can also cause anxiety. How do you prepare for being financially responsible for a whole new person?
Whether you're already in prenatal classes or just beginning to envision a future of shopping for baby clothes and choosing the perfect crib, one thing is certain: Preparation is key. Budgeting before and during pregnancy to get ready for your future new family member can help ensure you welcome the baby without too much financial stress.
Expenses to Consider During and After Pregnancy
While the latest jogging stroller and nursery decor may be fun to shop for, there's a wide range of costs during and after pregnancy to be aware of. From health care and work leave to diapers and onesies, these expenses will need to be part of your budget as you prepare for childbirth and beyond.
Costs During Pregnancy
- Out-of-pocket health care: Your health insurance may cover things like ultrasounds and prenatal vitamins, but you should also look into additional costs like parenting classes, body pillows and maternity massages (you deserve it). Also keep in mind that you'll have to meet your deductible before your health insurance kicks in with coverage for maternity care.
- Maternity clothes: Think beyond fashion and include items like new shoes and compression socks in your budget planning. Also consider hand-me-downs from friends or family, or online sites like ThredUp that carry discounted new and secondhand maternity clothes.
- Baby gear: Subtract any adorable ensembles you may receive at baby showers, and you'll still have a lot to shop for: clothes, toys, crib, sleep monitor, stroller, baby-proofing for your home and a car seat are all on the essentials list.
- Parental leave: Employed mothers-to-be may be eligible for unpaid leave under the Family and Medical Leave Act and additional state provisions, but the rules differ depending on the employer, how long you've worked with the company and other factors. Partners may also be eligible for some parental leave depending on where they live and where they work. That doesn't mean all your time off will be paid, however. Consider saving up sick days and vacation time to help cover your monthly expenses during your time off work. Also keep in mind that if a doctor requires bed rest for the mother-to-be, this could affect your finances for days, weeks or even months. Check with your employer to see what type of leave they allow, and find out from your state if any benefits will be paid during your time off work. California, for example, provides eight weeks of paid leave at about 60% to 70% of an eligible employee's salary. Short-term disability insurance, which you may be able to get from your employer or on your own, may also be worth considering if you predict you could have a difficult pregnancy.
Costs of Giving Birth
- Hospital birth: The costs of giving birth in a hospital can vary widely depending on the health insurance you carry and how smoothly the birth goes. If you're in the hospital, even the most uncomplicated birth can run up a tab. On average, out-of-pocket costs to deliver a baby for those with employer-provided insurance run nearly $4,600—more if you need a caesarean section, and much more with any complications—according to the journal Health Matters. Uninsured costs can be drastically higher, so if you're not covered by an employer, look into health insurance plans provided through the federal government's marketplace (you can still get coverage if you sign up while already pregnant, or within 60 days of delivering).
- Home birth: If you opt for an at-home childbirth experience, a midwife delivery could cost you nearly 70% less than the typical hospital tab. Keep in mind, however, that between 23% and 37% of women who go this route end up with a hospital visit to aid the labor anyway.
Costs After Having a Baby
- Health insurance: Once the little one arrives, it's time to add them to your health insurance. Employer-provided health insurance gives you 30 days post-delivery to put them on your plan; marketplace insurance allows 60 days.
- Diapers: Not the most pleasant expectation of expecting, but an undeniably necessary one. Budget for more than you think you'll need. Lots more.
- Clothes: Newborns grow quickly during the first year in particular.
- Child care: Because you may be headed back to work, and because you can take breaks too. Full-time child care can be expensive; research different options in your area to get a range of costs and options.
- Formula and food—and not just for the baby: You can meal-plan for yourself ahead of time to conquer that part of your budget well in advance. Of course, you may want to leave some leeway for takeout too.
- Their future: It's not too early to start researching tax-advantaged 529 plans and other college investment options. Even regularly contributing a small amount when you're juggling other post-childbirth costs will get you in the habit of saving for what is likely to be one of your most expensive costs as a parent. You might also consider programs like Upromise, which treats your credit card use like a rewards card for your kids' college fund; you can even link your 529 account for boosted benefits.
How to Budget for Baby Costs
Budgets come as a breeze for some people; for others, there are strategies and apps galore to help you with the task. Regardless, add a baby to the picture and budgeting inevitably gets more complex. If you've never had a budget before, now is the time to start.
- Map out your spending on paper. Begin by following where each dollar goes so you account for your spending. Go through bank and credit card statements and hold on to your receipts so you can physically see where your money goes each month. Apps like You Need a Budget can be particularly helpful during this beginning stage.
- Find a budgeting method that works. It might be a good time to assign a job for every dollar with zero-based budgeting or divvy up your earnings into different accounts. The 50/30/20 rule divides your budget into necessities, discretionary items and a third category for debt payments and savings. Research a few strategies and choose one you'll be able to stick with long-term.
- Check your health insurance. Insurers technically have to cover childbirth and maternity care, but coverage differs from one plan to the next. Check out the details for your provider's coverage, and add your spouse's insurance as secondary coverage if you feel it necessary. Adding a family member to an insurance plan will likely increase the cost, so find out what additional longer-term insurance costs you may be facing.
- Spend and save wisely. For starters, buy diapers in bulk for significant cost savings (or consider going the cloth-diaper route), and use free samples and coupons. Beyond baby costs, come up with ways to save money daily and monthly, and be sure you have an emergency fund in place for unexpected necessary expenses.
- Consider any income changes. If either parent plans to work less during child-rearing years, that will need to be a major factor in your number-crunching.
Expect the Unexpected
The unexpected costs associated with pregnancy and child-rearing can throw off even the best-planned budgets. A budget will still be an enormous advantage, as will putting aside emergency funds and diligently covering all the bases we mentioned here—but unpredictable financial needs will likely arise at some point. You may find yourself taking out a loan or using credit cards for expenses, but doing so responsibly doesn't have to put you in a difficult financial position or hurt your credit.
As you consider your finances for the coming years, keep your credit in mind. Adding free credit monitoring and focusing on paying down debts can boost your creditworthiness and open doors for future loans, perhaps for a new home or a bigger car in the garage.
Kids pick up on your financial practices early (usually by age 3), so getting your budget and credit in order now can make teaching them about money easier later on. Budgeting before and during your pregnancy doesn't mean parenting will be cheap—but it does mean you'll be more prepared when your priceless little one arrives.