Ka-ching! Financial Planning for BabyFor many couples, parenthood is an economic as well as an emotional decision. Before your baby arrives is the perfect time to assess what you have and what you'll need so you'll be ready when the time comes.
Make a Budget
Take a look at your budget in black and white. Whether you're using a computer or a pad and pencil, you need to see the numbers. Make a list of all of your monthly expenses, including mortgage/rent, food, clothing, entertainment, transportation, insurance, incidentals and other things you regularly spend money on. Then, put down how much you have coming in each month and compare them. Note how much is left over. You may find that you need to cut down on your expenses and start putting money aside for your baby. If you're going to stop working after your baby arrives, now 's the time to start "practicing" living on less. The same goes if you're going to take an unpaid maternity leave, even though it's only temporary.
Shopping for a baby-to-come is great fun and, if you're like most expectant parents, you'll want to get the best of everything for your little one. If you have unlimited resources, that's fine. Otherwise, give some thought to what items really need to be top-of-the-line. Seek out sales and don't forget the Internet; many of the pregnancy and baby sites have great stores and great deals.
What do you really need? You should buy a new onlydisable>car seat for your baby, and a new crib if you can afford one. If you buy these items used, or borrow them, be sure they meet current safety standards.
Check Out Your Health Insurance Options
Here are some of the things you'll want to ask about your plan:
- Does it cover prenatal care? What prenatal tests are covered?
- Does it cover your health care provider?
- Does it cover a pre-pregnancy planning visit with your health care provider?
- What delivery options are covered?
- Does it cover nursery costs for the baby?
- Is there a co-payment? If so, how much is it?
- Is there a deductible? If so, how much is it?
- Are anesthesia and emergency c-sections covered?
- Are sick and well-baby visits covered?
- What can I expect my total out-of-pocket expenses to be?
It's a good idea to check on all this before you get pregnant, in case you decide that your current plan doesn't meet your needs and you want to switch. If you decide to switch after you're pregnant, be sure that your new insurance plan covers pre-existing conditions.
If your employer doesn't offer health benefits, or you can't afford them, check out the children's health insurance program in your state. This program provides free or low-cost coverage to pregnant women and their babies, even if you and/or your partner are working. A good place to find out about programs like these is your local March of Dimes chapter and the blue pages in the white pages of your telephone directory.
Buy Life Insurance
No one likes to think about this, but you need to plan to take care of your child if something happens to you. Most new parents buy term life insurance, which insures you for a fixed amount for a given premium. It is generally the least expensive life insurance option and you can change the coverage, as your family's needs change. Don't forget to purchase life insurance for a stay-at-home parent. If something happens to that parent, the working parent will more than likely need to purchase child care and other services.
Get Long-Term Disability Insurance
Again, this is something you might not want to think about, but since people between the ages of 35 and 65 are more likely to become disabled than to die, it's very important that the primary breadwinner in the family has disability insurance. This type of insurance provides for your family if you're disabled and can't work. Check to see if you're covered by your employer and the terms of the coverage; if you don't think it's enough, get more.
Make a Will and Update Beneficiaries
You need to be sure your child will be raised and provided for in the way you intend if something happens to you. One way to insure this is to make a will that states who should take care of your child and his or her finances (it doesn't have to be the same person, and often shouldn't be). Also check your retirement accounts. Usually you name the beneficiaries of retirement accounts like IRAs and 401(k)s when you open them. You'll want to be sure these are updated to reflect your current intentions.
Look Into Maternity and Paternity Leave Policies
It's important to know what benefits your company offers new parents. If you work full time and plan to return to your job after your baby is born, find out about your company's maternity leave policy. Moms and dads who have worked at least one year for a company with 50 or more employees are entitled to up to 12 weeks of unpaid time off, thanks to the Family and Medical Leave Act. You're also guaranteed your job back at the end of your leave.
All this might sound like a lot, but there's no need to panic. Start planning early, get all the information you need and be realistic. You'll find that you can just check each of these tasks off your list well before you bring your new baby home.