Baby on Board: Finance Tips for Growing Families
Starting a family is a momentous and joyful occasion. But it can also be quite daunting for some, especially when it comes to the financial aspects involved. Frequent questions include: How much is this all going to cost? What type of insurance will I need?
Here's what you should think to help you prepare financially for the new addition to your family:
One of the first major costs associated with having a baby is, of course, the actual birth. Fortunately, most health insurance plans help to cover those costs. But make sure you understand the ins and outs of your coverage, such as whether or not you're required to have a pre-authorization or use an in-network provider. Out-of-pocket costs for your baby's delivery and hospital stay can also vary wildly depending on your insurance coverage, where you live, and several other factors. While you probably can't get an exact number upfront, it's wise to call your insurance provider and find out as much as you can. After the baby comes, have him or her officially added to your insurance plan in a timely manner. Because having a baby counts as a "qualifying event," usually, you'll have 30 to 60 days to make changes to your plan so that your whole family is covered.
First Few Years:
Most financial experts agree that basic expenses during your baby's first two years of life cost approximately $12,000 to 13,000 per year, and that annual cost is only going to go up from there. These expenses include the obvious things: food, clothing, and shelter, as well as childcare, education, enrichment activities, and more. There are initial costs as well. Things like car seats, clothing, strollers, and, of course, diapers and formula, which can add up fast. Starting a budget and setting aside money when you can will help ease the financial stress during those first few and years. Having a baby shower or asking for gently used hand-me-downs from friends doesn't hurt, either.
Planning for the Future:
Whether you set up a college fund or something else, it's a good idea to start preparing for your child's financial future from day one. A financial advisor can help you to understand your options and make a plan that will work for your budget. But even if you just start simply, by starting an account and making regular contributions, you'll be making an important investment in your baby's future.
Exploring Life Insurance:
When it comes to life insurance, the most important thing you can do is: apply early, even before you get pregnant, if possible. Although you can get life insurance early in a pregnancy, as it goes on, your risk increases, which may mean higher costs. This is especially true if you have an underlying medical condition or end up with a high-risk pregnancy. At a certain point, your application may be postponed until after your baby's birth. Even if the timing isn't ideal, purchasing life insurance is an important step in keeping your new family safe long-term.