Money Matters: Five smart financial moves for new parents
Becoming a parent changes your life, and that includes your finances. Let’s take diapers, for example. With 120 diapers ringing in around $40, and newborns needing as many as 12 diaper changes in a day … well, you don’t have to be an accountant to recognize your expenses are taking a hit.
So on top of attending birth classes and checking your pregnancy apps each day for updates on the baby, be sure to prepare financially as well. Here are five basic steps to take:
- Understand your health insurance.
- Get life insurance.
- Create a will.
- Tweak your household budget.
- Build your emergency savings fund.
There is always more you could do, but start with these five steps to give yourself a solid financial foundation as you welcome your sweet baby into the world. Keep reading for details.
Understand your health insurance and add your baby to your plan
Wouldn’t it be nice if your health insurance provider would automatically add your newborn to your plan so you could focus on newborn snuggles rather than paperwork? Sadly, that’s not how it works. Be sure to contact your insurance provider or employer in between diaper changes and naps! Plans typically give you 30 to 60 days after the baby is born to make changes to your plan.
It’s also important to know what maternity and baby benefits your plan covers (and doesn’t cover) so you can plan ahead.
“Even with insurance, you could still end up owing thousands of dollars for prenatal care and delivery. On the plus side, some insurance plans cover additional services you might not expect, such as lactation consultant visits,” said Jessica Sillers at moneygeek.com. “If your hospital bill comes back higher than you expected, keep in mind that you have the right to request an itemized bill so you can check each expense.”
Get a life insurance policy
Having life insurance can bring invaluable peace of mind as you welcome your little one. Like other insurances charging a monthly premium, life insurance is there to financially protect you and your family in case of rare worst-case scenarios.
“What many people don’t realize is how affordable life insurance–specifically, term life insurance — can be,” said Janet Berry-Johnson at Forbes. “For young and healthy adults, term life policies can cost less than many music or video streaming services per month, providing the financial protection your family needs in case an unexpected tragedy were to occur.”
Term insurance lasts for a specified period, usually 20 or 30 years, or enough to cover children through legal adulthood. These policies typically have a fixed premium.
Create a will
Updating your will, or creating one in the first place, is critical for new parents. Doing this will ensure your money and other assets go to your child and that they will be cared for by a trusted guardian in the event something happens to you.
While putting your will together with an attorney, it also is a good idea to sit down with your parents and your children’s potential guardians to discuss your wishes. These conversations will make it easier to execute the will if the need arises.
Tweak your household budget
Taking care of a baby can be quite costly, and it’s a lot easier if you take a thorough look at your household budget and make adjustments where necessary. Sometimes, though, we make it harder than it needs to be!
“If this is your first time with a new little one, you need to know a little secret: Babies don’t need much to be happy,” Sillers said. “A clean bottom, a full belly and lots of cuddles usually do the trick.”
Talk to your friends who have babies to get an idea of what you do and don’t need and how to save money. And try tools like a baby cost calculator from http://babycenter.com to help you get an idea of what you need to buy in your specific situation and how much it may end up costing.
Build your emergency savings fund
If an unexpected medical bill were to come your way, do you know how much it would cost you? According to http://healthcarefinancenews.com, you can expect to pay “more than $1,200 for services provided by anesthesiologists, $2,600 for surgical assistants and $750 for childbirth-related care.”
Unexpected medical costs or other surprise bills can be especially stressful when you have a new baby to care for, and if you find yourself unemployed, the stress can be overwhelming.
“That’s why it is helpful to have an emergency fund that will cover six to 12 months of living expenses in the event of a layoff or change in employment,” Berry-Johnson said. “An emergency fund is especially important if your family is reliant on a single family member’s income.”
Preparing for parenthood can feel like a hefty task, especially when you consider all the financial aspects of welcoming a new baby. Start with the basics by understanding your health insurance, getting life insurance, creating a will, tweaking your household budget and building your emergency savings fund. These steps will give you peace of mind as you begin the exciting adventure of parenthood.