The joy and excitement of starting a family may overshadow the fact that a child can cause havoc with financial stability. Consider these ten points when deciding if this is the right time to welcome a new addition.
New parents need a safe vehicle that will accommodate a child seat and all that goes along with taking a baby out of the house. A new car is a significant investment to address before the child arrives.
But another, more considerable financial concern, is where the baby will sleep. Does the current house have room for a nursery? If not, can you build an addition to your existing home? To discuss your options, contact Fellowship Home Loans.
- Monthly expenses
A new baby has many costly basic requirements: diapers, wipes, formula, food, bottles and clothing are just a few of the costs to be added to the monthly budget. Plan for these extras before the baby is born. And reach out to generous family and friends who might have some extra supplies or hand-me-downs you can have.
- Warehouse clubs
Consider joining a warehouse club such as Sam’s Club, Costco or BJs Wholesale Club. Make a list of what you need in bulk, such as diapers and baby wipes, and stick to it. They also offer food and household goods that will save money as well as time running from store to store. However, it is easy to buy items you do not need multiples of at a warehouse club, which would ultimately negate the cost-saving of being a member.
- Health insurance
Review your health insurance policy with your human resource representative or insurance agent. Can you add the baby to your health insurance immediately upon birth? What is the cost of adding the child? Having adequate health insurance is a meaningful conversation to have before starting a family. You can’t afford to be without health insurance.
Childcare is expensive, averaging up to 20% of a family’s monthly budget. Before planning for a baby, check out some options. Can family members watch the child one or more days per week? Does your employer have an onsite facility or provide a subsidy for daycare? Can you and your spouse work different shifts?
- Parental leave options
What type of parental leave options are available to both mom and dad? Most employers offer maternity leave, but what about paternity leave? If these benefits are limited or not available, can both parents afford to be home with the baby and, if so, for how long? Parental leave is a determination to make before starting a family, either by birth or adoption.
- Government programs
The availability of government programs is a topic to discuss with your financial consultant. The IRS offers offsets such as the Dependent Care Tax Credit and flexible pre-tax spending accounts that can moderate the inevitable increase in monthly costs.
- Family documents
Life insurance policies and wills must be updated as soon as a new addition is on the way. If the parents do not have a will, this is the time to create one to include appointing a trusted guardian for the baby. You could not risk the consequences if something were to happen to the parents.
- Long-term savings goals
Start planning for the child’s financial future. If you plan on contributing to their college tuition, now is the time to start saving and keep in mind that college, like daycare, is expensive! Factor the college fund contribution into the monthly budget.
- Pay down debt
When you begin to consider starting a family, take a look at your current debt, especially credit cards. Your monthly expenses will increase when the baby arrives. Large credit card bills will take away from the ability to provide for the child adequately. Consider waiting a year before having a baby and pay down those cards.
Bringing your baby into a financially sound environment will start the new family off on the right foot toward health and prosperity.