Financing The Future: Tips For Budgeting For Baby

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By Mia Bolaris-Forget

While you’ve made the “official” decision and announcement that you are TTC, it’s imperative to remember, that besides being excited, and mentally “ready”, you also need to be financially ready to welcome to your lives and home your new little bundle of joy that can literally cost you a bundle.

According to the United States Department of Agriculture, it can cost an average middle class family approximately $184, 000 to raise a child up until age 17. And, they note, that the more money you make, the more it costs to raise your child, because those who earn more, tend to spend more. And they note that those (families) earning an average of 70 thousand a year (or more) spend closer to nearly $300,000 on child care expenditures up till age 17. Even families who earn around $40,000 spend close to $150,000 over the same time span for raising (each) of their children. No matter how you slice it, that quite the chunk….and that’s without accounting for cars and the cost of “higher” education.
And, that’s money out the window and of your bank account before you’ve even before you’ve officially gotten started.

Experts say, that if you though marriage was a change in lifestyle, professionals remind prospective parents, that parenthood is all that, plus frequently an emotional and financial “drain”. They suggest getting ready during, if not before, you see the (celebratory) pink line on your home pregnancy test.

Among the first things you’ll want to look into is your health insurance policy (as well as your spouse’s) to see what it allows for, and to determine which of the two offers the best benefits in terms of pre-natal (and post-natal) care. Ideally, you should also consider switching to a better policy, if you need to, and prior to your pregnancy becomes a pre-existing condition (some insurances are “funny” about “those”). Also, look into which of the policies gives you the best care in terms of infant care and check up that are common and they’ll likely need.

It’s probably wise to note that these changes are best made during open enrollment in October. Also, when you get married, you generally have the option of adding your spouse to your plan.

Another good idea, say experts, is to “model” family life, including changing behaviors and living on one salary. Remember, this WILL be your lifestyle should either one on you opt to be a SAHP (stay-at-home parent). Putting this in practice will allow you to determine whether or not you “will” be able to make ends meet on one salary. Additionally, if you bank one of your salaries (during the experiment) you’ll be that much ahead of the game (at least by nine months) when that very special time comes.

And, while you’re at it, don’t forget to make a baby budget. Kids, even if they are small can be a big expense. From doctors visits to formula, food, furniture and “fashion” they can cost you a pretty penny. Make a list of all you want, all you need and expenses that may come up that you haven’t anticipated and map out a budget. Keep in mind that you can save in other areas such as saving on gas and work clothes by staying home and not commuting (at least not as far or as often as you use to). You also probably won’t be going out as much, or to the same expensive and posh places. But you should include the added expense of at least a once a week baby sitter to give you time away and alone.

It is especially important to factor in, say experts, not only the cost of an occasional sitter, but of day car, if you find you want or need to head back to the office and to work. They note, that often times hiring a nanny or au pair to work in your home may be more cost effective than out-of-the-home child care, depending on where you live, and how long you work (and of course your salary). The best way to “save” for this is to fund a flexible spending account with pre-tax dollars and then use those monies to pay for child care. It can cut your day-car bills by one-quarter to one-third. The only “caveat” is that it can only be done for a business with a tax ID number, such as a day-care center or day camp, not a nanny that gets her salary “off the books”.

Another thing to consider (immediately, and probably prior to having kids) is their future, and that means the often unpleasant business of confronting the “inevitable” and addressing the issue of your will, and how you’d like things to be handled should something happens to you.

Besides outlining the specifics in your will, you should also discuss and be prepared to name a guardian for your child. The guardian should be someone you both know and trust and who you both feel has proven to be responsible enough to look after your child or children in the even of your no longer be able to or not being around.

Experts also assert that this also signals a time to consider and purchase life insurance. How much you need depends on how much you’re both pulling in and the income stream your replacing, whether you want the proceeds of the policy to pay off your mortgage or to pay for college, etc. And, if you are both working, you’ll need life insurance for both of you. For most that means term insurance, generally the most affordable plan.

Finally, while your already on the track of considering your child’s future, you’ll also want to think about his or her education and for most youth that “does” mean college. Experts suggest investing in a 529 College Saving plan or a Coverdell education account (both with tax advantages), as soon as possible, preferably just before they are born, or shortly thereafter.

Keep in mind that the more years the money has to “mature”, the better, and the more funds available when your child reaches college age. And if you can’t afford both a college fund and an education fund, consider instead a Roth IRA, where the proceeds can be allocated to either/or, or both….and keep in mind that there is NO financial aid for retirement, but there is plenty college aid.