With all the excitement of finding out that you are pregnant, it can be easy to forget some of the more essential details of planning for a baby. One of the most critical things you need to prepare for is how a growing family may affect your finances. It may not be the most exciting thing to plan for, but it will make your life easier once the baby arrives.
If this is your first pregnancy, you may want to overestimate costs when it comes to financially preparing for a baby. On the other hand, if you are unsure what costs you should prepare for, you can typically break it into two parts. The first part will consist of items and costs that you can expect and start planning while pregnant, and the second part will cover post-delivery costs and other expenses that you should plan on having once the baby is born. There are many ways to prepare for your newborn financially, but we compiled a list of the top 5 best tips!
If you feel overwhelmed at all, remember to breathe. You have about nine months to start preparing for your baby, and if you aren’t sure where to start, use this guide as a helpful place to start!
What To Expect While You Are Expecting
So when can you start to prepare for your baby financially? Well, every situation is different, but the sooner you begin to plan, the more prepared you and your family will be. In addition to financially preparing for a baby, you will need to prepare for plenty of other things, so that is why it is so critical to start the process right away. Some families begin the planning process before trying to get pregnant, but that may not be an option for everyone.
Keep in mind that your body is going through many changes as the baby continues to grow and develop. You may experience lethargy, nausea, mood swings, or other symptoms that you may need to physically or mentally prepare for. Remember that the baby is receiving all of their nutrients from you, so it is essential to implement lifestyle changes that promote your health (prenatal vitamins, healthy diet, non-strenuous physical activity).
Best Tips On Financially Preparing For a Baby
As we previously mentioned, preparing for a baby can be overwhelming for first-time parents, so that is why we compiled the best financial tips to prepare for your baby’s arrival.
Analyze/ Review Your Current Financial Situation
Most people have a general idea of their financial situation, but you would be amazed at how many small costs add up as unnecessary expenses. Sitting down, writing out, and analyzing your income, expenses, and other financial obligations can really help you to see what you should be spending less or more on.
While checking your finances, you should focus on your assets and liabilities to better understand your overall financial situation. While evaluating your assets, be sure to include cash on hand and everything that you own that is either liquid or can be liquated. Examples of assets will consist of checking account(s), saving account(s), cash, investments, retirement, and property (real estate, vehicles, home).
Next, you will want to take a look at your liabilities and how they compare to your assets. Liabilities are financial responsibilities that you have (short term or long term) and consist of things or items for which you make regular monthly payments. Examples of liabilities are any expenses and bills that you may have (rent, utilities, internet, phone, insurance, etc.) as well as home loans, student loans, personal loans, or any other financial obligation that you may have.
Planning for Parental Leave
Once you have written down a list of your financial assets and liabilities, it may be an excellent time to start thinking about your parental leave options. Talk to your employer and see if they offer paid or unpaid maternity/paternity leave. If your job provides paid parental leave, it’s essential to determine how much you will be making because it is often only a percentage of your actual pay, but some employers offer full pay for a certain amount of time. You will need to know how your income will change in order to budget properly.
If your employer does not offer paid parental leave, it’s critical that you start planning ahead and calculating how you will save to make up for lost wages.
Review Your Insurance Coverage
Reviewing your insurance coverage when you find out that you are pregnant is imperative to your financial situation. Do your research, talk to the provider and see what is covered and what is not. Also, be sure to read the fine print and see what your deductibles may look like. This will significantly reduce the medical costs associated with having a baby and will help when you create your baby budget.
Prenatal care plays a huge role in your and your baby’s health during pregnancy, so be sure to find out whether prenatal services or care is covered. Remember that in the UAE, you must deliver your baby in a hospital, so you will not need to decide whether or not you want a home or hospital delivery.
Create a “baby budget” (pre-delivery & post-delivery)
Once you have completed or reviewed tips 1-3, you will have a better idea of your monthly finances and how much you will have (or need to save) to create a “baby budget”. Remember that your pre-delivery budget may be slightly different from your post-delivery budget.
A baby budget aims to help you and your family financially prepare for a newborn. It is always a good idea to overestimate or over save if possible. When creating a pre-delivery budget, consider savings, medical costs, baby essentials (crib, diapers, formula, clothes, etc.), prenatal supplements, maternity clothes, pregnancy classes, baby clothes, nursery costs, and cord blood banking, etc.
A post-delivery budget will overview what you and your family can expect to spend/save once the baby is born. When creating a post-delivery budget, be sure to include the costs of ongoing necessities such as diapers, formula, etc., and any new costs that may occur, such as childcare expenses or medical expenses.
Save as much money as you can each month and open a savings account. If you already have savings for emergencies or long-term use in your budget, try increasing your monthly contributions (if your household income allows for it). Children are unpredictable, and having money set aside for unexpected expenses can be very helpful.
Although not completely necessary, consider starting a college savings account for your child. Investing in your child’s education early on can benefit you and your child down the road.