Having a baby has an impact on personal finances. In this tutorial, Amanda Clayman discusses how to prepare financially for the arrival of a baby. The first thing to do is to take an inventory of current finances – i.e. review income, expenses, assets and debts. Review current insurance plans and benefits offered by your employer. Then research any new expenses that having a baby will incur.
- Of all the financial curve balls life can throw at you, having a baby is probably one of the most dramatic. Who would think that something so tiny could have such an impact on how you earn, spend, and think about the future. In this video we'll talk you through how to prepare yourself financially for the arrival of a baby. Whether you're clutching a positive pregnancy test or building your family through adoption or surrogacy, there are universal steps that everyone can take to ease the bumps in this transition. First, take stock of where you are today. Before you even think about what's going to change, it's important to figure out where you stand right here, right now.
Review your income, expenses, assets, and debt. If your day to day finances are a bit of a mystery, you can check out my other course, Financial Wellness: Managing Personal Cash Flow or Jane Barrett's course Personal Finance Fundamentals for more. Review your insurance plan and any benefits that may be provided by your employer. If you're in the U.S., the Family Medical Leave Act says that you can take up to 12 weeks of leave following the birth of a child or to welcome an adopted or foster child, but the law only applies to business over a certain size and unfortunately, it only stipulates unpaid leave.
So any paid benefits are up to the discretion of the employer. Some states do grant short-term disability benefits when you're unable to work due to injury or illness, including pregnancy. And a handful of states now require employers to provide paid leave. Check to see if you live in a state where this applies. Now, let's consider how a baby will fit into this context. Will there be an interruption in income after you bring the baby home? Perhaps you plan for one person to be a stay at home parent. In either case, start preparing now.
Look for ways to adjust spending and boost savings and get serious about paying down any debts you may have. Of course, we all wish we had an infinite amount of money for the care and keeping of our children. It's painful when financial considerations dictate what kind of childcare or education you can afford. So we really want to give ourselves as much space and time as possible to gather information, identify options, and to figure out priorities. I recommend you research various price points on each of these measures. For example, look at the difference between group daycare, a private nanny, and nanny share then see what housing and transportation costs might be in different school systems.
This way, you can start to analyze and compare what expenditures are most important to you. Remember, these decisions can feel very complicated and intense, take this process one step at a time and avoid the temptation to rush. As you're gathering information, make sure to talk about these options with your partner. New parenthood is often a time where values and priorities shift significantly so don't assume you know what your partner's wishes will be. If you're embarking on this journey as a solo parent, find a trusted friend or family member who can be a sounding board as you work through your own choices and plans.
Finally, two things. It's okay not to have it all figured out the day the baby comes home. This will always be a work in progress. And two, when it doubt, it never hurts to have more in savings.