Having a baby can be an exciting, happy time in your life. But it can also be a time of worry as you face unfamiliar physical, mental and financial commitments. Before the arrival of the newest and tiniest member of your family, there are several things you can do to prepare yourself financially.
In this article, you’ll learn six helpful steps to make sure your finances are baby-proofed, plus some recommended rewards credit cards and tips for improving your credit score — just in time to meet your new bundle of joy. For.
6 Financial Planning Steps for New or Expectant Parents
Take a full assessment of your finances
From prenatal care to making decisions about your child’s education – having a child is a huge financial commitment. To prepare, take a deep dive into your current financial landscape. It’s easy to misjudge your true financial situation when you’re generally able to pay your bills each month.
A new baby can dramatically change your lifestyle, so knowing exactly how many dollars you’re coming in and going out will empower you to make the right decisions.
- Calculate your monthly net take home pay (your paycheck after taxes, Social Security, healthcare coverage, etc.), plus any additional streams of income you may have.
- Understand what you currently have in checking, savings, cash, brokerage and retirement accounts.
- Calculate your total monthly debt payment including credit cards, auto loans, school loans and rent/mortgage.
- Calculate your estimated monthly expenses including gas, groceries, living expenses, entertainment and hobbies.
- Now do the math to see how much money you have (or don’t) have left over in a typical month.
You may find that you have to adjust your lifestyle to ensure that you have enough to pay for the out-of-pocket costs associated with having a child.
Review your family vacation options
You and your partner should talk to your employers about their family leave policies and how long you can take off work after the baby arrives. Be sure to understand whether you will be paid during that time, and if so – at what percentage.
In some cases, your employer’s parental leave policy may not provide full-time pay equal to your pay while you are away. Maternity and paternity leave can have a significant impact on your finances and income during that period, so it’s important to know the terms.
Understand the cost of raising a child
a study by Brookings Institution In 2022, the average cost of a middle-class family with two children, adjusted for future inflation, on a child born in 2015 is estimated to be $310,605, This breaks down to $17,255 per year to raise a child until age 18.
Consider the following costs.
one time cost
Even before your baby is born, you’ll be buying gear and nursery items for them to use within the first few years of their lives.
These one-time purchases include the following:
- car seat
- dresser or changing table
- baby sitter
- baby carrier or sling
- the bottles
- breast pump
- security door
As your child grows, so do expenses that you’ll want to factor into your budget. These include costs such as:
- Health care
- toys and entertainment
research health insurance
Labor and delivery can be costly, especially if you are not covered by your health insurance. According to the Kaiser Family Foundation (KFF), the average out-of-pocket cost of giving birth in 2022, even with insurance, is $2,854,
Check with your healthcare provider or insurance company to understand their coverage for labor and delivery, including out-of-pocket costs.
Ask specific questions about:
- Visits that will (and will not) be covered.
- Labor and delivery expenses that will (and will not) be covered.
- baby checkup
Babies usually visit the pediatrician for routine checkups about 7 to 10 times in their first year of life. With those visits come vaccinations and potentially medications. Be sure to understand whether your health insurance covers these things.
Knowing how much you’ll need to pay out of pocket can help you figure out how much you’ll need to contribute to savings ahead of time.
make a budget
After you’ve assessed your financial situation, understood your employer’s parental leave policy, reviewed the average cost of raising a child, and researched your health insurance — it’s time to budget.
How much money do you need to set aside every month to meet the additional financial needs of raising your child? This budget should be your north star and (hopefully) keep you from going overboard on adorable onesies and designer diaper bags. Make sure it accounts for all your loan payments, monthly bills, savings goals and a reasonable amount you plan to spend on your child’s needs.
You might also consider a credit card that offers the option to split card purchases into budget-friendly payments.
Build an Emergency Fund
If you don’t already have one, now is the time to build an emergency fund. Kids are expensive and sometimes come with unexpected costs. You may also face an unexpected job loss or medical emergency. Having a backup fund can help lighten the load of a surprising financial burden. Experts recommend adding at least three to six months’ worth of living expenses to your emergency fund.
Start by putting a small amount of each paycheck into a separate bank account. You might also consider depositing any tax refunds or birthday money into the account. As you can, increase the amount you put into the fund over time until you reach a number that will cover your living expenses for several months in a row.
Best credit cards for new parents
The expansion of your family means that your spending habits will change drastically. now is a good time to consider getting Credit Card Which will help you to earn rewards.
Chase Sapphire Preferred: Apart from earning points that you can redeem on a number of items, this credit card is a great option if you have family trips in your future.
- Earn bonus points after spending an eligible amount on purchases in the first few months of account opening.
- Earn 5X points on travel purchases through Chase Ultimate Rewards,
- Earn 3X points on dining.
- Earn 3X points on online groceries.
- Earn 3X Points on select streaming services.
- Earn 1 point per dollar spent on all other purchases.
- Get 25% more value when you redeem points for travel through Chase Ultimate Rewards.
Chase Freedom FlexSM: This is a great card to earn cash back and take every purchase further. This card offers a low annual fee, and the cash back rewards don’t expire as long as your account is open.
- Earn bonuses after spending an eligible amount on purchases in the first few months of account opening.
- Earn 5% cash back up to $1,500 on combined purchases in bonus categories every quarter you’re active.
- Get 5% cash back on travel purchased through Chase.
- Earn 3x points on online grocery purchases.
- Earn 3% cashback on dining.
- Earn 3% cashback on purchases at Drug Store.
- Earn 1% on all other purchases.
How to Improve Your Credit Score Before Your Baby Arrives
When you find out you’re expecting, improving your credit score is probably the last thing on your mind. However, kids are expensive, and creating a plan to build your credit can help ensure you have a financial safety net if you need it.
Here are some ways to improve your credit:
- to start building a credit history, This means that you have been able to show your creditworthiness through a history of consistently paying your bills on time.
- pay off your debt as much as possible. Pay off low balances first, and then pay off your high-interest credit cards.
- View your credit report and score To make sure there is no error. You can access your credit score from Chase for free with Credit Journey.
- pay your bills on time every month. Try setting up automatic bill pay for credit cards and other accounts.
Unfortunately, babies don’t come with an instruction manual or a neatly organized budget. Welcoming a baby into your family requires thoughtful planning and often financial sacrifice. Despite this, it can be one of the most exciting times of your life. To keep financial pressures to a minimum, follow the practical steps mentioned above. The most important thing is to enjoy this special time in your life.