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Preparing for a baby isn’t just tiny clothes and heartwarming ultrasound photos; it involves a lot of financial preparation. This article will lay out the most important financial tasks on your plate from pregnancy to baby’s first years, including:

  • Estimating your medical costs
  • Planning leave from your job
  • Budgeting for the new arrival

Some parenting preparations are best learned on the fly — how to effortlessly and painlessly change the messiest diapers, for instance. But the list of things to do before the baby arrives and within his or her first several weeks is lengthy, so tackling certain tasks now is a smart idea.

  • What should I do Financially before having a Baby?
  • How much Money Should be Saved before having a Baby?
  • How do you deal with Financially Struggling Parents?
  • Help Your Parents Financially Without Money
  • Avoid the Pitfalls of Helping Your Parents Financially
  • What should Parents Consider before having a Baby?

What should I do Financially before having a Baby?

If you’re preparing financially for a baby or new addition to your family, you probably have a million things running through your mind. Whether your mind is on diapers or you’re concerned about child care costs, we’ve put together this list to help you prepare for the arrival of your new family member.

1. Review your health insurance

You’ll need to add your new addition to your health insurance policy, so take the time to review your policy now, while everything is relatively calm. If you’re currently covered through your job, you can find out how by contacting human resources, or talking to your insurance provider.

Read Also: Top 10 Ways to Budget as a Parent

Also keep in mind that even with health insurance, you might be responsible for some out-of-pocket expenses when it comes to childbirth and family coverage plans. It’s important to research your options to find the best deal but also ensure you’re getting quality care. Companies like Medivera Compounding Pharmacy focus specifically on women’s health, having invested in nipple ointment for new, breastfeeding mothers or vaginal creams if you find yourself experiencing issues after birth. Pharmacies like this balance cost and care, by providing a mothers, among other demographics. Start looking into the cost of medical aid early and see what your insurance will or won’t cover.

2. Register early

New additions are exciting for everyone, including family and friends. It’s likely they’ll be looking for ways to get involved or to help, which is why it’s a good idea to set up a registry. Register for everything from diapers to the big stuff so there’s something at every price point. Plus, friends and family may come together to help buy those big-ticket items, which will help you cut expenses.

3. Set up a baby account

Not only do babies need a lot of stuff, like diapers and formula, but you’ll also be looking at bigger expenses such as car seats, furniture and possibly child care. It’s a good idea to start saving for all of it as early as possible. Consider a separate savings account where you can start putting money away now.

You might also consider setting up automatic transfers from your checking account to your savings account after each paycheck to help you build your savings without having to think about it. When the baby arrives, you’ll be ready for the additional expenses.

4. Create a (new) budget

If you’re wondering how to prepare for a baby financially, start thinking about your budget sooner rather than later. Start by talking to your spouse or partner about any big changes that might impact your finances.

For example, if one of you is thinking about staying home after the baby arrives, now is a good time to plan for life with one income. Look at your current budget—see if you can find wiggle room in your discretionary income and savings. Generally, this is where you’ll find the money to pay for your new expenses.

5. Start a 529 account

It’s never too soon to start saving for college. A 529 plan is a tax-advantaged investment account to be used for qualified education expenses down the road. Because any earnings on your investment have the potential to grow, the sooner you can start putting money into that account, the more you’ll potentially have available when it comes time for your baby to be an undergrad.

Just be sure you also understand that your investment could lose value. It’s a good idea to request the 529 plan’s official statement and read it carefully. This will include information about things like investment objectives, charges and state tax or other state benefits that are only available for investing in your home state plan.

6. Purchase life insurance and create a will

Getting life insurance and creating a will are not only parts of smart planning, but they can also provide comfort in knowing there is a plan in place to help protect and take care of your family. Plus, this is also a good time to review your existing policies and update your beneficiaries, if needed.

When you’re getting ready to have a baby, it’s a fun and frantic time. But it’s also the best time to start financially preparing for what’s ahead. Put together a plan you feel comfortable with, and know that if you need to, you can always adjust your budget later and still be in good shape.

  1. To be eligible for favorable income tax treatment afforded to any earnings portion of withdrawals from Section 529 accounts, such withdrawals must be used for “qualified higher-education expenses” as defined in the Internal Revenue Code. Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax, as well as applicable state and local income taxes. State tax treatment may vary for distributions to pay for tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school.
  2. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

How much Money Should be Saved before having a Baby?

The average age that Americans become parents has been steadily climbing for years. Today, more women between the ages of 30 and 34 are becoming first-time mothers than their counterparts aged 25 to 29, according to data from the CDC.

Overall, the average age when women have their first child is 28. That marks a significant jump from previous years: In 2000, the average age for first-time mothers was 24.9 and in 2014 it was 26.3.

As Americans wait longer to have kids, they’re also giving themselves additional time to build a financial cushion. It can cost approximately $233,610 to raise a child from birth through age 17, so giving yourself as much of a head start as possible can really help.

By age 30, a good rule of thumb is to aim to have the equivalent of your annual salary put away, Kimmie Greene, money expert at Intuit and spokeswoman for Mint.com, tells CNBC Make It.

Even in your 20s, experts recommend saving 25 percent of your overall gross pay, which includes direct contributions to a 401(k) or Roth IRA, any company match you receive and any cash savings, including an emergency fund. Greene says you can also count any funds you’re putting toward credit card debt and student loans in that percentage as well.

But when you’re young, the dollar amount isn’t the only thing that matters. It’s equally important to build the habit of saving a portion of your income every month, even if that number starts off small, so you can gradually begin to save more.

There’s no way around it: Having kids is expensive. One parent who tracked every dollar found that she spent $20,000 in the first 18 months alone. And that’s on the low end. Households bringing in $200,000 can spend $52,000 just in the first 12 months of their newborn’s life, according to a report from NerdWallet.

Add in the rising cost of college and, if you’re middle-income, have spending patterns that are similar to your fellow parents, have two children (the average family has between two and three) and send them to an in-state public school, you could spend $514,200 total on your kids.

By the time you’re ready to start a family, it’s helpful to have as much as possible in the bank, so get in the habit of putting money away for the future as early as possible.

But remember: Even as you begin to divert some of the funds once reserved exclusively for retirement toward other goals, such as having a baby, you should find a way to continue to contribute to a retirement account. While debt can be repaid and prospective college students can apply for scholarships and take out loans, your retirement savings are much harder to replenish without the benefit of time.

How do you deal with Financially Struggling Parents?

Watching your parents age can be a scary prospect, especially as they approach the point when they need more help from you. If your parent has no money or money troubles, they may come to you for financial help.

It can be difficult to help your parents financially if you are struggling with student loans, credit card debt, or providing for your own family. However, it is possible to assist your parents without going broke if you make a plan that factors in what they need and your capacity to help.

Evaluate the Financial Help Your Parents Need

Before your parents retire or face serious financial hardship, have an honest discussion with them about the challenges they’re having or expect to have and the type of and extent of help they need. You can either help your parents with money or through non-monetary support like financial advice.

The right approach will depend on where your parents are financially now, where they want to be, and how you can help fill the gap. A financial advisor can help facilitate a conversation about these delicate topics.

If your parents have diligently saved, budgeted well, and are on track to cover their day-to-day expenses in the near future and their living and travel expenses in retirement, their challenge might be an increasingly unaffordable living situation or an inability to save.

Non-monetary help might be sufficient for their needs, but it’s still important to discuss the specific type of assistance that would best serve them, and if it’s for ongoing help, how long they might need you to provide it.

However, if your parents are struggling financially, whether because they have unpaid debts, were laid off right before retiring, or had to take an early retirement, they may not be able to make ends meet now let alone achieve a comfortable retirement. They might prefer monetary support in this scenario, in which case it’s useful to inquire about the amount they need.

Once you understand your parents’ current situation and retirement plans, you begin making plans for what you can do to help them.

Help Your Parents Financially Without Money

There are several ways to support your parents without opening up your wallet:

  • Help them downsize. If your parents are finding their current home unaffordable because of its size, it may make sense for them to downsize. Help them run the numbers on how much a move to a smaller home would save them over time to determine whether it’s worth it. The analysis should factor in their mortgage, housing-related expenses, and the cost of the move.
  • Guide them through a relocation. Living in a location with high property taxes—for example, in a city with a good school district—can also put your aging parents in an untenable financial position. Volunteer to help your parents identify cities and states with a lower cost of living. You can even offer to help them pack and move to their new home.
  • Ask them to move in. If your parents can’t afford to live independently anymore, assess their health, your current lifestyle, and the other members of your household to determine whether they can live with you. Taking in your parents can have a profound positive impact on their finances, often freeing them from a mortgage, rental payments, and associated bills.
  • Create a budget for them. If your parents are seeking ways to stretch their money further, a simple way to help them financially is to sit down together and draft a basic budget that factors in their income and expenses every month. If their income less than expenses is negative, they’re breaking even, or the amount is positive but they’re spending too much, look for areas where they can earn more or spend less to live more comfortably.
  • Help with maintenance or repairs. If your parents need help paying for car or home repairs, and you have the skills to do them, offer to do these repairs for them occasionally.
Help Your Struggling Parents With Money

If your parents are past the point when non-monetary support can help, you may need to contribute real dollars to improve their financial situation. If you go this route, consider their needs alongside your own needs and financial constraints.

Make a Budget

It’s important to create a monthly spending plan for yourself to determine how much, if any, you can reasonably allocate each month to your struggling parents and still cover your own expenses and contributions for retirement or long-term savings goals like your child’s education.

Rather than adding a single expense labeled “parents” to your budget, budget for individual expenditures you plan to cover for your them, such as:

  • Upcoming surgeries or potential medical emergencies
  • Medicines your parents rely on
  • Flights for your parents to visit you
  • Having your parents over for dinner a few times a week as they get older
  • Grocery shopping for your parents

Set Limits

With individual expenses listed in your budget, you’ll be better poised to stick to your budget for your parents. However, you’ll still to establish a time frame for how long the payments will last (indefinitely or for a fixed period of weeks, months, or years).

You’ll also need to ensure that your parents prudently spend any money that you give them during that time. If they can’t responsibly manage the money, make it clear that you won’t be able to offer more, or offer to pay their bills for them.

Set Aside Money Now

You may be young now, but it’s never too early to start saving—especially if your parents have no money for their current needs or have a financially insecure future. This is an important step to take when helping parents who are struggling financially because medical emergencies can happen suddenly and without warning. Having money set aside to help you cover some of these costs can make a last-minute situation less stressful.

You can allocate money for your parents’ needs through an emergency fund, which you can draw on to pay for unplanned expenses, and sinking funds, which you can use to cover planned expenses like repairs for your parents’ home.

Keeping these funds in an interest-bearing account like a savings account or money-market account allows you to earn money on your deposits without any effort.

Make a Long-Term Plan

Even if your parents are years away from retirement, it’s a good idea to put a plan in place now for how to help them financially later so that you are not scrambling to get power of attorney to manage their finances on their behalf or find the correct account information should your parents experience serious illness or dementia.

Avoid the Pitfalls of Helping Your Parents Financially

While you may want to do everything in your power to help your parents succeed financially, there are some financial decisions relating to your parents that you should think twice about:

  • Cosigning on a loan with your parents: If you cosign a mortgage or other loan on behalf of a parent, you become as responsible for the debt as your parent. If they default on the loan, you’ll have to start repaying the debt, which can make it a risky undertaking.
  • Adding your name to your parents’ property:If your aging parent adds you as a co-owner to the current deed on their house, the portion they transfer to you will be treated as a gift that is taxable to them, and if you later sell the property, to you.
  • Becoming the guarantor for your parents’ medical bills: While certain states have what are known as “filial responsibility” laws that can force you to support your financially struggling parents, you are generally not responsible for your parents’ debts. However, when filling out admission agreements at nursing homes and other health facilities, be careful not to sign as the guarantor or the person who is financially responsible for the patient’s bill, if it is not your intent. Doing so could make you responsible for the final costs of your parents’ care.

If your parents are struggling financially, you can provide monetary or non-monetary support to improve their situation. But before you write them a check or offer your advice, evaluate their needs and your capacity to meet them so that you can arrive at an approach that works for all of you. This way, your parents can live in comfort and you don’t have to compromise on the life you planned for yourself.

What should Parents Consider before having a Baby?

If you are thinking about expanding your family, there are many things to consider. An expectant mother’s physical health and well-being is obviously of utmost importance, but there are emotional and financial aspects to think about as well. 

We are now going to talk about 11 things you need to consider before you decide to have a baby.

1. If You’re Ready To Put Someone Else First

You’ve heard this once, and you’ll hear it a million times more. Having a baby is a huge responsibility. Therefore you need to really be sure you and your SO are ready to put another person ahead of yourselves, according to PsychCentral.com. According to the outlet, you and your partner should be prepared to put the baby’s needs before your own, and be able to adhere to the baby’s schedule.

Part of this is feeling like you’re planning accordingly. Tessina who is a psychotherapist and author explains that so many changes will happen from the very moment the baby is born, so it’s vital to be prepared. “The day a baby is born, everything is different from the day before,” Tessina says.

“There is no way to accurately predict how these changes will feel, and the learning curve for new parents is very steep. Planning ahead for what you can anticipate, like finances, helps make the transition easier.”

2. If You & Your Partner Are Financially Stable

Speaking of finances, let’s talk money. According to newlyweds expert Francesca Di Meglio, who penned a piece on Newlyweds.com, if you don’t think you and your SO can afford a baby, you should definitely wait. Di Meglio suggested taking a hard look at your financial situation and seeing whether you’ll be able to afford the necessities — diapers, clothes, formula, health insurance, and the like. If not, hold off.

Masini says that in addition to being financially stable — you should also be mindful of the importance of health insurance. “Having jobs and health insurance will provide for a lot less stress when times are troubled with a child in your family,” Masini says. “A sick baby is a lot worse all-around when you don’t have health insurance.” Don’t forget about the importance of life insurance, either.

“Having a life insurance policy in case something happens to one or both of you and the child is left without one or both parents isn’t a sexy subject, but it will help you both understand the non-romantic arena of being a parent,” Masini adds.

3. If Your Relationship Is Very Solid

If you and your partner have a rocky relationship, perhaps this isn’t the greatest relationship to bring a baby into, according to Edward Kruk, Ph.D., a family policy expert at the University of British Columbia, who spoke to Men’s Health on the topic. Kruk told the outlet, “If there were problems before children came along, those problems typically only get worse—usually much worse.”

Tessina stresses that your relationship should be strong enough to handle the changes that are about to come your way. “Things happen when couples are unprepared, but if there’s a chance to prepare, I think creating a solid partnership, learning to solve problems together, and being able to talk about your parenting styles and your hopes and dreams for your children is very powerful,” Tessina explains.

Masini adds that it also helps if you and your SO have been together for a while.”For instance, knowing your partner for a longer period of time, versus a short period of time, is best,” Masini says of preparing to bring children into the mix. “When you quickly have a child after three months of dating, chances are good you’ll have more bumps in the road than if you’ve known your partner for three years.”

4. If You Are Both Self-Sufficient

Does your SO constantly need babysitting? If he or she is a baby themselves, likely you guys are not ready to have children of your own. Likewise, if you act like a baby regularly (or still have a selfish side, which is totally OK by the way), you might be the one in the relationship who simply isn’t ready.

Masini explains, “Being self-sufficient is not just about finances. Someone who is emotionally self-sufficient or socially self-sufficient is better suited to parenting than someone who is needy and troubled.” Stop and consider if you both genuinely fit into the “self-sufficient” mold. If so, that’s a good sign.

5. If You’ve Considered Your Job’s Maternity Policy

Maybe this point doesn’t immediately come to mind when you and your SO are discussing having a baby — but it should. You’ll want to have an idea of how much time you’re allowed to take off and what your compensation during that time will be, for example, according to Fit Pregnancy.

You might also consider looking into a paternity policy if that’s relevant for you and your SO, the outlet added. Regardless, you both should have an understanding of what post-baby work life will look like for you both as a couple.

6. If You Are Both Ready For Sacrifice

Di Meglio noted in her Newlyweds.com article that when you and your partner have a baby, you’ll be sacrificing a lot of things that you may have once taken for granted — like nights out with friends or sleeping late. For women, this element of sacrifice will begin from the moment you find out you’re pregnant, so you’ll have to be willing to give up some of the lifestyle you’d become accustomed. You both need to be certain that you’re ready to sacrifice in that manner.

7. If You’re Prepared For Those Nights Of Minimal Sleep

Building on that sacrifice point for a second, those solid nights of sleep you’re used to will be no more once there’s a baby around, so you must be sure you’re prepared (at least mentally) for some sleepless nights, according to WhatToExpect.com. If you’re already a couple of people who run on minimal sleep, you might be a whole lot more prepared for this baby thing than you anticipated.

8. If You Have Enough Physical Space For A Baby

Do you have a place in your apartment or house that you can physically fit a crib and baby furniture? If your current space isn’t large enough, are you willing to relocate to a bigger place? Making sure you have room for a baby is something to be mindful of, according to TheBump.com.

9. If You’re Not On The Hunt For Extra Love

Think hard about the reasons you want a baby. If one of them is that you’re looking for extra love, you should rethink having one, according to PsychCentral.com. The outlet noted using a newborn baby’s love to supplement where other love is missing (e.g., a parent, an SO, friends) is never a good idea.

10. Your Age

Plenty of people have children at a young age and the parents and children turn out to be splendid, but statistically speaking you should think about your age when considering whether you and your SO are ready for children.

According to research from Ohio State University, if you have your first child before the age of 23 you’re more likely to experience depression due to job or finances. This, of course, isn’t to say having a child before then is off limits or is going to lead to any issues, but it’s certainly something for you both to consider.

11. If You Are Both Responsible Adults

Last, but certainly not least, you and your SO should both consider yourselves to be genuinely responsible before deciding to have a baby, according to Fit Pregnancy. Another life will now be in your hands, so each of you should feel ready for that task.

Read Also: How Personal Finance is Evolving Through Mobile Apps

You’ll also want to consider how your household responsibilities will add up once the baby is here — like excess laundry, additional trips to the store, more cleanup, etc. — according to Fit Pregnancy. Being responsible enough also means being open and able to having candid conversations about what’s to come before you decide to have a child.

Masini says having talks about the future of your family is especially important. “Deciding how to raise a child when it comes to education, parenting, discipline and even religion are all talks best had before a child is born,” Masini says.

If any of the above signs point to you and your SO, it might mean you’re ready to take that next step and bring a baby into your lives. As mentioned, make sure to talk out these points with each other before deciding to do so, and it might be really beneficial in helping you to decide if you’re truly ready or not.

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