Preparing for a Baby on Board
What is the Money Date? A weekly time to check in. 3 things we review and update: 1. Spending 2. Earning 3. Savings
Adding a child to your family can bring joy, excitement – and a boatload of bills.
Did you know that a middle-income couple will spend about $233,000 to raise this baby to age 18? No wonder couples feel they have to wait to have kids until they feel established with their careers!
It’s absolutely necessary for expectant parents to understand the cost and be ready financially. Here are some ways to prepare financially for the parenthood:
- Plan & budget for newborn expenses: A newborn is accompanied by expenses such as diapers, formula, clothing, toys, baby furniture, and child care. I would recommend budgeting at least $15,000 in the first year. Expected income is worth mentioning here, because you have to think about how it will be affected if you have to take time off.
- Boost emergency fund: 6 months savings is the target. This will help cover time off taken with the new baby, and medical and other expenses for the baby.
- Get appropriate insurance: Get a handle on the finer points of your family’s health care, including maternity coverage, co-pays, deductibles, and what exactly your policy will cover. Also make sure appropriate disability and life insurance policies are in place.
- Plan ahead for education costs: I used to work for the Maryland 529 plan years ago teaching parents about starting to save early. A dollar invested today is worth much more than a dollar invested in the future. If you open an account now and start saving $100 per month, that will get you about $47K in savings in 18 years assuming a 6% return. That is enough to cover state school for one year in today’s dollars.