Let’s face it: your new bundle of joy doesn’t come cheap. You’ll want to plan ahead for your additional expenses, whether that be researching the best personal loans or tweaking your budget. After all, one recent study estimates that a middle-income ($59,000-$107,400/year), two-child family will spend about $13,000 per child each year.
Here are 8 money moves for expecting parents to help prepare for the laundry list of expenses that parenthood brings.
8 money moves for new parents
Before you bring home your new baby, there’s plenty you’ll want to consider doing.
1. Research your health insurance
Do your due diligence regarding your health insurance so you know how much you’ll owe. Ask about your prenatal visit copays, what’s actually covered under your provider’s prenatal care, and your deductible amount.
2. Create an emergency fund
Unexpected expenses or unemployment are always difficult to deal with, but even more so when you have a family. Put aside some savings to create an emergency fund—money set aside to cover at least 3-6 months of living expenses, although a year is preferable.
3. Pay off existing debt
It’s hard to pay new expenses when you’re still trying to pay down existing debt. Try to pay off as much as your debt as possible before you bring home your new baby. You can use a debt repayment strategy, such as the debt avalanche or debt snowball methods, to help you start your parenthood journey debt-free.
4. Purchase life insurance
Term life insurance can help ensure that your family will be taken care of should the worst-case scenario occur. Premiums vary depending on variety of factors, such as age and existing conditions. One study showed that a healthy 30-year-old can receive a $250,000 20-year term policy for only $13/month.
5. Figure out parental leave
Check what your company’s parental leave policy is. Federal regulation requires you to be allowed to take 12 weeks of leave when you have a baby (regardless of which parent you are). However, this doesn’t necessarily mean you’ll get paid for your time on leave. If you won’t receive paid leave, you can check to see if you can use sick days or vacation to get paid for at least part of your time off.
6. Tweak your budget
The costs of diapers, formula, and onesies can quickly add up. You may need to tweak your current budget to accommodate some of your new costs. Take a look at your monthly income (post-tax) and your projected monthly expenses as a new parent. Note which expenses are fixed and won’t change much month to month, like diapers, and which expenses are variable and could fluctuate, such as a new car seat or toy. If you find that you need a little extra financial help, you can look into taking out a personal loan.
7. Figure out childcare
Childcare can be one of the biggest costs for new parents. It’s important to secure a childcare provider and set money aside as soon as possible. You may want to consider using a dependent care FSA, an employer-sponsored pre-tax account that can be used for qualifying childcare expenses.
8. Start a 529 plan
While your child’s formal education might feel lightyears away, it’s never too early to start a 529 plan. A 529 plan is a tax-advantaged savings plan that you can use on qualifying education costs. Starting one early can give your money more time to grow tax-free.