7 Financial Moves to Make Before Your First Child

Starting a family can be an exciting milestone. Yet, once you have your first child, your life as you know it will certainly change.

Your finances are bound to change as well since you’ll now be spending more money. Research shows that American parents will spend $233,610 on average to raise a child from birth to 17 years old. This figure includes costs ranging from housing and food, to medical expenses and child care.

The key is to focus on preparing financially for your new bundle of joy so that you don’t get in over your head – financially speaking, of course.

Here are 6 key financial moves to make before your first child arrives.

1. Create a New Budget

You may already have a budget in place, but it’s time to update it to accommodate your growing family. Consider how some of your goals and expenses will change once you have your first child. Will you have to consider childcare costs or increase expenses in other areas?

You may even want to cut or reduce some expenses that no longer seem necessary, like eating out several times a week. Be honest about the changes you’ll need to make financially and develop a realistic budget so you can plan your spending once the baby arrives.

2. Have an Income Plan for Maternity Leave

It’s likely that having a baby will affect your household income and either you or your partner may want to take some time off work once the baby is born.

For starters, decide what your circumstances will look like when the baby arrives and how that may affect your income. If you’re expecting an income decrease, you can prepare for it by working extra hours or side hustling to bring in more money before your little one arrives.

Remember: Your new budget will help you determine how much you’ll need, and you can always cut expenses and save up in advance to accommodate the changes.

3. Build Your Emergency Fund

It’s no secret that kids cost quite a bit of money – nearly a quarter of a million dollars to be exact, according to the USDA. That’s why it’s always best to beef up your emergency fund.

For example, you’ll likely be spending more money on planned expenses like food, clothing, diapers, baby gear, and possibly childcare. However, there are a ton of additional expenses that could pop up like unplanned doctor’s visits, travel costs, and extracurricular activities.

If you plan to take maternity leave, factor in extra costs you’ll incur during this time as well, such as medical bills, household expenses, and purchasing baby gear and supplies.

To help you get a jump on this, start saving up money ahead of time. If you are currently saving 10% of your income, for example, perhaps you can double or triple that amount so your emergency fund can grow exponentially. Having at least three to six months of expenses saved is a great starting point.

Final tip: Make it automatic so some money is transferred to savings as soon as you get paid.

4. Start Buying Supplies and Gear Early

Once the baby’s arrival is just a few months away, start buying supplies and gear so you can stock up. You may even want to plan your baby shower a little earlier so you can know what you’ll need to buy before delivery time.

For example, you can budget for larger expenses like a crib and car seat and pick up less costly items like diapers, wipes, and clothes each time you get paid. This way, you’ll spread out your purchases so you don’t have to buy everything at once.

5. Anticipate Medical Costs

Having a baby is costly whether you have health insurance or not. U.S. hospital deliveries cost around $3,500 per stay. When you add in pre-natal and post-delivery care, you could be looking at an overall cost of $8,802, according to Parents.com.

To better prepare, factor in the strong chance that you may have medical bills and will need to add your baby to your insurance coverage (typically within 30 days of birth).

Make sure you know what your health insurance deductibles and copays are for labor and delivery. As the due date nears, you can also start looking for a pediatrician in your insurance network.

6. Increase Your Life Insurance Coverage

When you have a child, you become completely responsible for his or her care.

So, it’s a wise idea to help cover those expenses in the unfortunate event that you are no longer around. To do this, it’s a good idea to consider life insurance, or upgrading your current policy.

There are two types of life insurance: term which is temporarily and whole life which is permanent. Term life insurance is more affordable and you can get quotes online from sites like PolicyGenius and NerdWallet.

“It’s important to start thinking about upgrading your life insurance policy when you’re pregnant and some insurance companies will even let you increase coverage at this stage,” says Sa El, founder of Simply Insurance.

“Aside from increasing your coverage, you can also purchase a life insurance policy for your child. The best thing about purchasing life insurance early is that the rates will be the lowest since age is a huge risk factor.”

El also recommends calculating your insurance needs beforehand.

“Life Happens has a good calculator that you can use to figure out your insurance needs. You will have to consider current expenses like housing and debt, along with future expenses like college costs, in order to determine your insurable need so don’t skip this step,” he says.

7. Minimize Debt

Let’s face it. Being in debt can hold you back. Debt payments eat up your disposable income and can likely cause a new parent to stress out over money.

So, before you have your first child, try to minimize your debt and pay off most (if not all) of your accounts. By getting rid of these liabilities, you’ll free up more money to spend on other areas of your budget. Having less debt will also enable you to save more.

Enjoy Parenting Without All the Financial Stress

Worrying about money is never fun, especially when you’re adding a new baby to your family. This is why it’s important to make these seven key financial moves. This way, you can focus on raising your new baby while you thrive financially.

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