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Budgeting for Baby: Financial Planning Steps for Your Newest Addition

27 Apr 2021 by: Matt Ryan  , ,

Welcoming a new baby is an exciting chapter filled with memorable firsts and sleepless but fulfilling nights. Preparation is invaluable in making the time with your new addition a little easier. There’s much to plan, from nursery shopping to childcare, and your short- and long-term finances are no exception. To ensure you’re not overlooking key financial planning steps, we’ll share how you can better prepare for your newest family member before and after their arrival. 

Before Baby Arrives

You can plan to incorporate many of these steps before deciding to have a baby or before your baby arrives. 

  • Review your medical insurance plan. Pregnancies vary, so having an in-depth understanding of your insurance coverage will help you avoid unexpected expenses during your or your partner’s pregnancy and delivery. Ensure you and your partner know and plan for out-of-pocket costs for copays for regular doctor’s visits, high-risk pregnancy requirements, complications during delivery, and/or an extended hospital stay. 
  • Build up your emergency fund. Ensure you have three to six months’ worth of expenses saved to facilitate irregular income, unanticipated medical expenses, or other emergencies. 
  • Calculate new baby expenses into your budget. Sit down with your partner and outline your needs and wishes so you can budget, save, and enjoy this exciting time in your life. Needs may include budgeting for a new maternity wardrobe, dietary restrictions, healthcare services, and medication. Wishes may consist of going on a “babymoon” before the baby arrives, keepsake ultrasound services, midwife/doula support, or monthly prenatal massages.
  • Inventory baby items early. Reviewing what you’ll need in advance will help you avoid making large payments all at once and ensure you’re prepared with the essential and often most expensive items when the baby arrives. To help reduce your costs, make your registry early so that friends and family can throw a shower for you or help support you in the most efficient way by knowing what items you need. Also,  consider online sales sites, like OfferUp, to find deals on gently used big-ticket items such as cribs, car seats, and strollers. 
  • Consider buying additional life insurance. If you’re the primary financial provider or plan to stay home with the child, adding a life insurance policy is an extra safety net to support your family if you’re no longer able to. 
    • Discuss income and career expectations. Now is the time, if you haven’t already, to discuss if you or your partner will stay home with your child, return to work full time or part time, or plan to take extended parental leave—which generally provides a percentage of your regular income. If your future income will likely be inconsistent or one spouse will no longer work, you can use this time to plan, save, and prepare for those realities.
  • Build a fund for alternative family-building expenses. Exploring fertility treatments or adoption options may be part of your journey to becoming a parent or expanding your family. There are multiple options available at a range of costs that may require additional financial planning. 
    • Assisted reproductive technology: There are several types of fertility treatments available. When calculating expenses, you may consider that in vitro fertilization may cost $12,000 or more per cycle and require multiple rounds to achieve pregnancy. 
    • Adoption: An adoption through the foster care system may have no or low costs, while a private adoption may cost up to $50,000. When building your savings, calculate for factors such as legal services and adoption agency fees, as well as travel costs if you’re considering an intercountry adoption. You may also consult with your HR representative to confirm if you qualify for adoption or legal services reimbursement.

Bringing Baby Home

While you can, and should, put off many tasks once your baby comes home, some financial items are beneficial to attend to sooner rather than later.

  • Secure healthcare and necessary documents. Once you have your baby’s birth certificate and Social Security card, you can add your baby to your healthcare plan to ensure there isn’t a lapse in coverage should your baby require a doctor visit. During the finalization of an adoption, your adoption agency can generally guide you through the process of getting your Final Decree of Adoption, ordering an amended birth certificate, and applying for a Social Security card. 
  • Plan for childcare. Whether one or both parents work, some level of childcare may be needed to take care of all that a new little one needs; even working from home is difficult to balance with a newborn’s immediate needs. Plan ahead for daycare, nannying/nanny-sharing, or private in-home care. Extended family who offer to help may need support with travel expenses and accommodations. Explore your options and develop a plan for the budget and logistics.
  • Develop an estate plan. An estate plan will outline your will or trust, define how to distribute your property, designate a power of attorney, and provide guardianship plans for your kids, among other actions. While many parents don’t want to imagine not being in their children’s lives as soon as welcoming a new baby, an estate plan can ensure your wishes are carried out in line with your values and the best interests of your children. 
  • Start a college fund. The earlier you begin saving for your child’s college, the better, and a 529 plan can help you get started. If you have the excess cash flow, learn how this tax-advantaged savings account can reduce college expenses down the road.
  • Track your monthly expenses. Once your baby arrives, your expenses (and sleep schedule) may feel a little unpredictable. Family and friends will likely bring you meals, and you’ll rack up more utility costs than usual while staying at home. For these and other reasons, it’s crucial to track monthly costs within the first few months to firmly grasp your budget needs and plan how you can continue to meet your long-term goals.

As you grow your family, we wish you health, happiness, and a financial future that supports all you hope to achieve on your journey. For more information about how we help families prepare for the future, contact us today.




CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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