Here Comes Baby: How to Financially Prepare for Your Newest Family Member

Financial Planning Here Comes Baby: How to Financially Prepare for Your Newest Family Member

Women in the U.S. are having more babies – nearly four million last year, according to the Centers for Disease Control and Prevention. In fact, the US has been in a bit of a “baby recession”: 2014 saw the first increase in the US birth rate in seven years!

This increase – fueled by women in their 30s and 40s – may come as a surprise to you, but what’s an even bigger surprise is how costly it has become to raise children. Kids are cute, but they sure are expensive!

Don’t be caught off guard. Here are a few things that you can do to financially prepare for your little one’s big arrival:

Update Your Budget

To raise a child born in 2013 to the age of 18, it will cost the average couple just over $245,000 (in today’s dollars), according to estimates from the U.S. Department of Agriculture. That’s nearly a quarter of a million dollars! And get this: this estimate does not include college, which can easily add $100,000-$300,000 to the bill. Have you reviewed your budget and made changes to prepare for this precious new financial responsibility? Start by analyzing both your fixed and flexible monthly expenses. Then determine areas where you might be able to cut back, and in the process, free up some cash. Travel? Entertainment? Dining out? Next: Apply this cash toward a designated baby account, which you can use for things like maternity leave, diapers, clothes and other necessities.

Set Financial Priorities

Determine what your financial priorities are and then ensure that your spending reflects these priorities. In other words, if saving for your child’s college is more important to you than a big house with a backyard, then set up a state-sponsored 529 plan (Find out more at Then get going on those monthly contributions! What’s most important is you recognize that all of your financial decisions are connected. For example, if you only stay in luxury hotels, or shop designer brands, that affects everything from your college fund to your emergency savings account and more.

Watch the Impulse Buys

While you should never economize on safety items (like car seats, cribs, and intercoms), there’s no reason to spend big money on outfits your child will outgrow in a matter of weeks. Yes, you’re going to be tempted to splurge, particularly if this is your first child, but you have to think rationally or the spending could easily spiral well beyond the expected $12,000 on child-related expenses in the first year alone.

Adjust Your Insurance

Even if you have health insurance, you’ll probably be accountable for some out of pocket expenses when it comes to childbirth. Get to know your health insurance provider really well during the pregnancy to make sure you’ve got a handle on what is/is not covered, keeping in mind that the average out of pocket costs for delivering a baby range from anywhere from $500 to $3000 or more, according to

Once you have a child, you also need life insurance, which provides income for your dependents should something unthinkable happen to you. Talk to a financial planner about various considerations. A term life insurance policy, which covers you for a specific period of time, is generally preferred. You need to think about how much: as a minimum threshold for how much insurance to get, multiply your gross salary by 10. And don’t delay or you could leave your family in a vulnerable position.

Assess Future Plans

Once the baby is born, will you both continue working or will one of you stay at home to look after the baby? Or are you considering daycare or a full-time nanny? Decide together what is right for your family and then do the math to see how this decision will impact your finances.

Of course, the love you provide your new child is the most valuable gift you can give. Start there, and you’re already on the right path!

– Vera GibbonsMint Contributor and Personal Finance expert

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