Financial preparations play a crucial role when you and your spouse are planning to have a baby.
Having a baby is a big step in any relationship whether you choose to conceive it on your own or if you want to adopt. The fact remains that it is a huge step and requires an equal amount of preparation. This is important because it will help you enjoy and spend time with your little one without worrying too much about your finances.
It is difficult to constantly be thinking about how you can put food on your table while taking care of your baby. While giving your baby a bath, you could be bothered about the credit card bills that are coming and due at the end of the month. The last thing you need is being forced out of your home because you are unable to make rent.
This is why it is important to plan for your family’s changing financial needs when a baby is coming. Financial preparations are important in your overall process. It helps you ensure that you are able to enjoy your time and spend quality time with your baby. Remember that the time you spend with your child is crucial to their early development.
If you or your spouse is on the family way, here are a few things to keep in mind as you prepare for the newest member of your family. Your finances will be important in helping you prepare and enjoy this new area of your life as a parent.
Pay down debt obligations
Financial preparations when you are expecting a new member of your family include paying down your debt obligations a little more aggressively. Especially for the ones that carry high-interest rates. You want to be able to divert a good amount of your income for the baby and not for recurring debt payments. To do that, you want to make sure that you have a detailed list of your debt payment first.
With the list, you will be able to quickly identify the debt accounts you can focus on. Are these going to be your credit card debt? Or do you have payday loans or personal loans you want to get out of the way first? You might be tempted to try and pay down the one with the biggest balance but you have to be strategic about this.
There is a good chance that this would be your mortgage loan. And if it is, remember that it is a secured loan. As such, your interest rate could be lower than most of your debt payments. Also, it could take you years to pay off your house, and even then, you could have lost money making high-interest payments on other accounts. So be smart on what you choose to focus on so you can make the most out of the time you have before the baby comes.
Consider your living situation
Having a baby is a major development in life. It is not something you simply adjust to when the baby is already at home. And financial preparations need to include your living situation. One of the first factors you need to look at is if your baby has a room at home. Though they will be sleeping with you in the first few weeks, you need to let them sleep on their own in a few months.
Changes in your living situation might be more drastic than just needing a room. You could begin to think about the idea of moving into a new place. A house where you have enough space for you and your children. You could explore looking for a safer place to raise your child. You are now in the market for a bigger house with a backyard for the kids to run around and play in. Buying a house might seem complicated but you can prepare for it.
Financial preparations for this decision need a lot of spadework. You need to take a look at the housing market and look for the property you want to move into. Your credit score will also play a crucial part in your house-hunting process. More importantly, you need to save up for your down payment on the property.
Save for parental leave fund
Once the baby comes, you might need a few weeks off from work and that is your right. The U.S. Department of Labor shares that certain employees can avail of up to 12 weeks of job-protected but unpaid leave under the Family and Medical Leave Act (FMLA). This is good news for parents but it can prove to be challenging for your finances.
This is why financial preparations need to include a parental leave fund. Just because you have a new baby does not mean your expenses at home will stop as well. On the contrary, you could see a spike in your expenses from all the needs of your baby. You would be buying new clothes, toys, and other needs. Even their food requirement would be different.
All these new and additional expenses will be on top of your existing household budget. If you did not save for them, it can take its toll on your income. It will significantly reduce the amount you can use and pay for other expenses at home. Save up for your leave fund so you can enjoy your time with your little one without worrying too much about the expenses.
Save for college fund
Financial preparations for your baby need to include long-term goals and one of them could be a college fund. The simplest and most straightforward approach to your child’s college fund is to simply open a bank account and put money into it for them to use. But what you need to consider as well is that inflation will creep up and severely diminish the value of your savings if simply left in a savings account.
This is where a 529 plan can come in. The U.S. Securities and Exchange Commission shares that a 529 plan is a tax-advantaged savings plan designed to help with future higher education costs. Sometimes referred to as “qualified tuition plans,” they can help you save up now for your children’s cost of attendance tomorrow.
It might seem to be a daunting task especially when you look at the average cost to attend college. But you just have to take it one step at a time. Open an account first to start saving for a 529 plan with the minimum amount needed. Then you simply add to it over time. It would stretch your finances out too thin if you try and save for everything in a few short years. Start saving small and increase it as you go along. If it is not enough for a full ride, it will lessen the student loan they have to take out.
Save for retirement
It might sound too advanced to start thinking about retirement when you have a newborn at home. Your small one needs all your love and attention at the moment and you want to focus on that. But you need to remember that they will eventually grow up. And just like saving for their college fund, you also need to have the same mindset when it comes to your retirement needs.
The earlier you save for your retirement, the higher the chances where you can retire when you want to. Of course, consistency also plays a big part in the whole process. This is important as Pew Trusts shares that many people would be forced to work past their retirement age due to financial needs. This makes it even more important to save for retirement as early and as frequently as you can.
If you are able to save for retirement, it also lowers the chance of having to depend on your children when you finally retire. When your children grow up seeing how you prepare for your future needs, it also teaches them an important lesson in life. They will grow up knowing the value of saving now for what they need in the future.
Financial preparations are a big part of your exciting journey as a parent when you are expecting and having a baby. It takes time and dedication to make sure that you are able to enjoy your time with them while you are staying at home.