Regardless of your age, becoming a new parent is something no one can fully prepare for. Although sleepless nights and additional responsibilities are inevitable, having a new baby can wreak havoc on your finances if you’re not careful. You will likely have to adjust your cash flow to account for the added expenses of another mouth to feed. Perhaps one spouse will decide to stay home, leaving you with one income. With so many changes being thrown your way, here are a few tips to make it less of a financial shock.
Understand your coverage. Understanding what expenses your health insurance covers will help you determine your maximum out-of-pocket expense. Babies can be expensive; in fact, the average cost of raising a child from birth to age 18 could be as high as $260,366 according to Nerd Wallet, and this doesn’t even factor in college expenses.*
Estimate your healthcare costs. Once you understand your insurance benefits, you should have an idea of the cost of routine doctor’s visits, from your very first ultrasound to the birth of your child. It’s helpful to come up with a budget before your new bundle of joy arrives and adjust it as needed. Once your baby is born, it may take a few months until you are comfortable with your cash flow.
Save ahead for future expenses. While not all expenses are foreseeable, much of what comes with the cost of having a child can be budgeted. Doctor’s visits and child care costs, for instance, will likely be an ongoing, consistent amount. Saving an extra $50 or $100 from each paycheck can help pad your child care expense fund.
Fund your Health Savings Account (HSA). If you have an HSA account, you can use those funds for the routine doctor visits. When your newborn is sick, the last thing you want to worry about is how you will pay the co-pay and cost of medicine to get your baby healthy again.
Cut down or pay off old debt. Before adding new debt with the cost of a child, it’s a good idea to pay off old debt if possible. This includes any credit card balances, student loans, and any other debt you can afford to pay off.
|Just the basic essentials||Food, housing, clothing, transportation, health care, and health insurance||$260,366|
|Deluxe essentials||All of the above with more expensive choices for food and clothing, and life insurance for the parents||$342,976|
|Deluxe perks||All of the above plus extras for early childhood care, savings, education, music and sports lessons, family vacations, electronics and gaming, and other purchases "just because"||$745,634|
* Source: Nerd Wallet, Cost of Raising a Child Tops $260,000 – Just for Basics, March 20, 2017.