Financial planning for a baby
Having a child is one of the most rewarding experiences in life. But the impact to your finances can be daunting - hundreds of thousands of dollars between birth and age 18, not including college costs or inflation adjustments. Here's how to manage your finances during this exciting time.
- Build some financial reserves before the birth. Once you know you are going to have a baby, make sure to save some additional money. It will be easier to cover those diaper costs if you don't have to worry about money.
- Check your medical insurance. If you do not have medical insurance, buy a policy before you become pregnant. Some policies require three or more months of coverage before the start of your pregnancy. Other policies limit the amount they will pay, so be sure to check the terms of your policy.
- Check your employee benefits. Many companies have provisions for paid leave for pregnancies for both the mother and the father. You may even be able to combine vacation pay, disability pay and sick days to maintain your income for a few extra weeks before returning to work.
- Review your life insurance coverage. You are going to have an additional person in your family that is dependent on your income. If you do not have life insurance, now is a good time to get it. If you have coverage, consider increasing it to recognize the additional financial responsibility you will have. Many companies offer inexpensive life insurance coverage as part of their employee benefit program and there are inexpensive term policies available from many life insurance companies that you may want to explore.
- Talk to your employer. Be sure to know your employer's maternity leave policy and talk with your supervisor so the appropriate planning can be done.
- Write or revise your will. Even if you do not have substantial assets, a will is necessary at this time. The will can designate guardians in case you and your spouse are unable to take care of the child. You should also use this time to create a power of attorney for health care issues. This document will spell out the type of care you will receive in case you and your spouse are unable to make those decisions.
- Consider how you are going to handle child care. If you plan to stay home with the child and not return to work, you will have less income. If you plan to use a day care center, it will cost money. In either case, investigate your options and do some financial planning before the delivery of your child.
- Start saving for college. College is expensive and the sooner you start saving, the easier it will be. Once the child is born, you will want to apply for a Social Security number and open a savings account for the child.