Having a baby changes every aspect of your life, including your finances. In this article, we share eight tips for successfully navigating your finances as a new parent.
1. Add your baby to your budget
The Economic Policy Institute’s Family Budget Calculator is a neat tool for estimating community-specific costs for a variety of family types. For example, in Danville, VA, a couple with one child can expect about $4,662 in monthly costs including housing, food, child care, transportation, health care, other necessities, and taxes. Of course, every family’s budget will differ slightly based on factors such as whether one parent stays home, health insurance deductible, how much driving you do, and more.
Ideally, you and your co-parent already have a budget in place. If not, start by making a list of your fixed and discretionary monthly expenses. That will help you figure out how to incorporate the new expenses a baby will bring such as diapers, formula if not breastfeeding, clothing, gear, childcare, and more. AMNB offers a free budgeting tool, Money Tracker, available within our online banking. This is helpful for setting a budget and tracking expenses, integrated within your online banking.
2. Research the costs of giving birth
Giving birth can be expensive, even if you have health insurance. While maternity care is one of the 10 essential health benefits mandated for coverage under the ACA, you should still check your policy to see what kind of deductible, coinsurance, or copay fee you’ll be on the hook for. Many providers also bill globally for pregnancy care, labor, and delivery. This means you’ll pay one co-pay, deductible payments, or coinsurance fee for all those services instead of making individual payments for each doctor’s visit. Check with your OB/GYN provider to learn how you will be billed.
Keep in mind that global maternity billing doesn’t include additional costs from giving birth in a hospital, such as the anesthesiologist’s fee. So it’s best to save in advance for the medical bills that may arrive after you get home from the hospital. If your employer offers a Health Savings Account (HSA) or Flexible Spending Account (FSA), you can deposit extra funds to prepare for the birth of your child. Saving in an HSA or FSA will also reduce your taxable income for the year, a nice additional perk.
Don’t have an employer-sponsored HSA? You can open an HSA through AMNB.
3. Find a pediatrician in your network
Pediatricians usually accept a wide variety of health insurance plans so you could start by asking friends and family for recommendations, then call the office to make sure they’re in-network with your plan.
It’s best to choose a pediatrician before your due date because the baby’s first appointment is usually within a few days of birth. Routine health visits for your child are usually covered at 100% regardless of your policy type, but sick visits will incur a co-pay, deductible, or coinsurance fee. This is the time to ask about any charges for after-hours calls or telemedicine visits (if offered). You should also review your employer benefits to find out if you have any telemedicine coverage through a different network.
4. Expand your emergency fund
As with a household budget, you should already have an emergency fund set up. However, it’s never too late to start one. So whatever balance you’re starting with, $0+ in your emergency fund, work on expanding it as much as your budget allows to include the needs of your child.
Financial advisors recommend having at least three months’ worth of living expenses saved up, but more than this would also be worthwhile. A lot of the calculation comes down to how stable your career field is and whether your family will be living on just one income or have a second full or part-time income as a backup.
Just be specific about when it’s okay to draw funds. Typically, you’ll want to ask yourself:
- Is it unexpected?
- Is it necessary?
- Is it urgent?
For example, a sudden job loss or medical emergency would almost certainly require drawing from your emergency fund to pay bills. However, a small auto repair could possibly come out of your regular budget (if funds allow). The bottom line is to use your emergency fund only when you need to and don’t use it as much as possible.
5. Start saving for future education
Whether you envision private school and/or college in your baby’s future, it’s never too early to start putting money away. Savings account options include:
- Tax-advantaged 529 plans can be used for higher ed, K-12 private/religious school tuition, student loan repayment, and more. Check out Virginia529 and NC 529® Plan to learn more and open a new account in your state.
- The AMNB Kids Club is a youth savings account for children 12 and under. Open one today to save cash gifts for your child and help them learn about savings as they grow.
- Regular savings, money market, and CD accounts are also great ways to put aside money for your child. Learn more about your savings options at AMNB.
6. Get an estate plan
Adults of all ages, childless or not, should have at least a last will and testament in place. New parents may want to go further in the estate planning process such as increasing life insurance coverage and designating a legal guardian for your child in the event they become orphaned.
Other administrative tasks include updating your primary and secondary beneficiaries on relevant accounts such as life insurance and retirement accounts. You may also want to update your tax withholdings and, of course, add your new baby to your health insurance policy.
7. Decide on a childcare option
One of the biggest financial decisions you’ll make as new parents is whether or not one parent will leave the workforce to care for the baby. Yes, you’ll save on childcare costs but lose one income and associated benefits such as social security benefits and employer contributions to retirement plans. Alternatively, some professions may allow for one parent to go part-time or reduce their working hours until the child begins school. If both parents are going to work full-time, who will care for the baby? Some families have a grandparent willing to help out part- or full-time, which can save some money on childcare. Other options include a nanny, in-home daycare, or daycare center. If you’re going the daycare route, tour centers well in advance to get on the waiting list of your top choices.
8. Buy used as much as possible
Aside from presents you receive at your baby shower or after the birth, aim to buy all the clothing, toys, and gear your child needs from consignment and thrift stores or online marketplaces like Craigslist, Nextdoor, and Facebook. With some exceptions such as car seats, babies and toddlers outgrow things so quickly you can save money and still obtain high quality, gently worn items. And when it comes to disposable items like diapers and wipes, many parents swear that the store brand works just as well as the name brand.
9. Choose experiences over activities
Along with the endless options for gear, toys, and accessories, today’s parents also face a variety of baby and child enrichment activities. While there’s nothing wrong with signing up for Mommy and Me yoga or a children’s music class if you want to, don’t lose sight of all the free experiences available to you and your baby such as library storytimes, local parks, hiking trails, and more. Choosing experiences over activities can help keep your overall child-related costs down.
AMNB is here with all your banking needs!
Established in 1909 in Danville, Virginia, we have a long legacy of helping people and communities thrive. With multiple banking locations in Virginia and North Carolina, we are proud to be your community’s hometown bank. Let us help you save for your child’s and your family’s future with savings account options for every stage of life. Open a new account today by visiting your nearest location in Virginia and North Carolina or contacting us to learn more!