Starting a family? Make sure you’re financially prepared.
Starting a family is such an exciting time in your life, but it can also be an expensive one. In fact, statistics from the Brookings Institution, an economic think tank, show that the average middle-income family will spend $310,605 to raise a child born in 2015 up to age 18. If starting a family is in your plans, it’s important to make sure you’re financially prepared. In this blog post, we break down five ways to prepare financially for starting a family.
Review Your Health Insurance Coverage
Up until now, your health insurance has probably been adequate, covering routine doctor’s visits and prescriptions. However, now that you are planning to start a family, it is a good time to review your health insurance coverage. In the United States, you could have private insurance, insurance through your work, or a federal insurance plan like Medicare or Medicaid.
Health insurance can help you pay for some of the costs of maternity care, delivery, and new baby wellness care, including copays and other out-of-pocket costs. If possible, don’t wait to become pregnant before looking into your health insurance coverage. Try to plan your insurance for the year based on your plans to start a family.
Rework Your Budget
We cannot reiterate this enough – starting a family is expensive, and you will soon have costs related to children that you’ve not had previously. Because of these new expenses, it’s important to rework your budget. Think through the upfront costs of starting a family and the only upfront costs of starting a family, but also ongoing costs associated with having a child. Here are some examples of new expenses you’ll experience in the first few years of your child’s life:
- Car seat and stroller
- Bassinet, crib, mattress
- Changing table
- Baby clothes
- Diaper bag
- Doctor’s appointments
And remember, these costs are just for the first few years of your child’s life. Once your kid reaches new life stages, you will need to revisit your budget and update accordingly.
Get or Update Your Life Insurance
Although this isn’t the most exciting part of family planning, it is important to make sure your life insurance is up to date before bringing a child into the world. If something happens to you, standard life insurance protects your family from the loss of your income. When having a child, though, it may be beneficial to purchase additional coverage for yourself or your partner. Life insurance can ensure that your child’s living costs are covered, in addition to covering any outstanding debts, mortgages, and your child’s education. It’s also recommended to revisit your life insurance coverage again after your child is born to update your beneficiaries.
Arrange for Childcare Now
Whether you’re planning to hire in-home help or place your child in a daycare, you should start looking into options early. This will not only give you an idea about how much childcare will cost, but you may also find that some daycares have long waiting lists. Even if you decide to stay at home with your newborn, it’s still smart to investigate childcare options in case your circumstances change.
Keep in mind, some employers offer dependent care FSAs that can help with the cost of childcare, so consider this benefit when budgeting for childcare costs.
Keep Spending on Baby Gear in Check
As a first-time parent, it’s tempting to buy all the cutest, latest, and greatest baby gear, but these costs can quickly escalate. Remember that children grow and change so much in the first year, and certain clothing, diaper sizes, toys, and gear may only be used for a couple of weeks, if at all. We recommend talking to new, experienced parents about what is necessary versus what is nice to have. From there, search online for the best deals for the necessary gear.