There’s a lot of extra work to be done when you’re expecting a baby. Expecting parents have a nursery to paint, walkers to buy, doctor’s appointments to attend, and nannies to recruit.
But in addition to these activities, experts say, newbie parents can take care of financial problems in the months leading up to birth.
Pregnancy is a perfect time to check in on your financial situation, it’s the perfect time to review your budget, emergency funds, estate planning documents and insurance needs and decide if something needs to be refreshed.
Although not every financial issue needs to be addressed before the baby arrives, experts note that it’s easier to satisfy the financial burdens when you’re not taking care of a two-week-old.
Want to know how to plan financially for a new baby? Here’s what you have to do:
1- Understand your health insurance and anticipate costs.
Having a baby is an expensive event, this is the case even when you have health insurance. You are encouraged to forecast your expected costs fairly early into the pregnancy. Making sense of your medical bills can help you navigate prenatal care, labour and delivery, and most importantly the bills that will ultimately follow. If you have benefits offered by your employer and the business hires at least 15 employees on a full-time basis, the insurance would cover maternity care.
The amount of prenatal and maternity expenses that will be covered depends on the insurance carrier and on which coverage you have but normally the employee benefits cover between 25% and 90% of the costs. Bear in mind that this is after the deductible has been reached and that there might be a different deductible for each family member, so you’re likely to pay a little more than that out of pocket. In other words, if any family member (including your new-born baby) has a premium of $2,000, you will have to cover the first $4,000 in medical care costs for both yourself and your child, plus whatever your coverage doesn’t pay for.
If you have an individual insurance policy that is not offered by your employer, the chances are that it would not cover the expense of pregnancy unless it is stated. Several states have mandated policies to cover prenatal and delivery expenses, but most states do not require them to do so. In 2010, only 12% of individual policies provided maternity coverage. It is also possible to buy a rider to cover maternity costs, but the cost can be high up to $1,100 a month, and often there is a waiting period of one to two years before the benefit can be used. So it is important to read the fine print when determining the coverage your policy will give you
2- Plan for maternity/paternity leave.
How much time you and your husband (if you have one) get off work and if you are paid during that period will have a big effect on your household finances in the coming year. Understand the policies of your company and the laws of your state to get an accurate image of how your maternity leave would impact your bottom line.
3- Draft your pre-baby budget.
If you are aware of what you are going to spend on medical costs, you are better set to make informed decisions concerning future purchases, be sure to consider how your income will be impacted in the coming months, and prepare a shopping list for your new addition and adjust your budget accordingly. Babies come with a lot of expenses, so set a limit on both the necessary and optional purchases (like that designer diaper bag or high-end stroller) and consider buying used items off auction sites to keep spending under control. Certain items like strollers and car seats tend to command a premium and are often used sparingly, so consider buying them from used, provided they are in good aesthetic condition.
4- Plan your post-delivery budget.
Recurring costs such as diapers, child care and extra food will change your household expenses for years to come. It is ideal to plan for them now so you aren’t caught off guard.
5- Choose a pediatrician within your insurance network.
Your baby’s first doctor’s appointment will come in their first week of life, so you’re going to need to look up a doctor, preferably within your insurance network. Speak to friends and family to get advice, contact local hospitals and ask a paediatrician for an interview before you make your decision. When you’re looking for the right doctor, don’t forget to double-check if he or she is on your insurance network. Ask the facility, but search by contacting the insurance provider to make sure you’re not affected by unwanted out-of-network charges.
6- Start an emergency fund.
If you don’t even have a rainy day fund, it’s time to anticipate those emergencies. Kids are vulnerable to an injury, and with the cost of raising a kid, you don’t know whether you’re going to have the discretionary income to compensate for any unforeseen expenses. Getting at least three to six months’ worth of living costs covered is a perfect starting point.
The time before your new-born arrives need not be stressful, so start planning and putting everything in order before the big day arrives. Also keep in mind that manufacturers often lavish maternity wards with freebies, but the hospital staff is sometimes too busy to remember to dole them out. You will be able to get stuff like tubes of lotion and diaper ointment, coupons for stuff like baby wash and baby portraits, plus a diaper bag to hold it all. So be sure to ask whether there were any samples around.