Millennial Money: 4 money moves to make before baby arrives
The arrival of a new baby is all-consuming. In the early weeks, your waking hours are a cycle of feedings, diaper changes and Googling “Is it normal for a baby to (fill in the blank).”
Mustering the energy — and attention span — for otherwise routine tasks like showering and paying bills can feel like a tall order. You’ll be lucky to remember what day it is, much less when your next credit card payment is due.
Do your future, sleep-deprived self a favor and start prepping your finances early into your pregnancy so things can run on autopilot for a while after the baby arrives.
If you don’t already have a budget, start there, says Cecilia Williams, a mother, certified financial planner and the chief operating officer of Halbert Hargrove, a financial planning firm.
“Outline all your current income and expenses so you and your partner have a solid understanding of where your money goes each month,” Hargrove says. “This will absolutely need to be adjusted as you get closer to your due date, so having a starting point is priority No. 1.”
Then build a plan for managing the other costs, large and small, that come with having a baby.
RESEARCH THE COST TO DELIVER YOUR CHILD
The price tag for childbirth is steep. The average cost for delivery can range from $10,000 to $20,000, depending on where you live. Even with insurance, new parents can expect to pay several thousand dollars out of pocket for maternity care.
Contact your insurer or the hospital where you plan to deliver to get more specific numbers. Then take a deep dive into your health care coverage to understand your coinsurance, deductible, maximums and coverage limits.
Anthem, United Healthcare and other major insurers have tools you can use to get estimates of total and out-of-pocket costs, based on your plan. Use these figures to set a realistic savings goal to cover them.
Have access to a flexible spending account? If timing allows, set your contributions to save incrementally, tax-free for your hospital bills. When hospital bills start rolling in, you can pay directly from your FSA or use a rewards credit card and submit for reimbursement.
PLAN AHEAD FOR PARENTAL LEAVE
Paid parental leave is far from guaranteed. In fact, only 11 states and Washington, D.C., have paid leave laws, some of which won’t take effect for several years. And only 25% of employers offer some form of paid leave, according to a 2019 survey of employer health benefits by KFF, the nonpartisan health care think tank formerly known as the Kaiser Family Foundation.
If you have paid leave through your employer, ask questions early. Find out how many weeks are covered and at what percentage of your salary. Do you need to use vacation and sick time first?
You also want to know when and how your benefits will be paid out, especially if they’ll come from multiple sources. Trust me, you don’t want to be one week postpartum emailing your benefits provider to unravel the logistics of your leave payments.
If you don’t have access to paid leave, or you’re planning to take additional unpaid time, practice living on the reduced income to the extent possible. This will help you identify optional expenses to reduce or eliminate and help you build a savings cushion before your baby’s arrival.
START ‘PAYING’ FOR CHILD CARE
Child care is the single largest monthly expense for most new parents. Get a jump start by “paying” for day care well before your baby arrives.
Put the money into a separate savings account — ideally one that earns interest — every week or month. This helps you adjust to the new expense and allows you to bank a few months of child care costs that you can tap for upfront costs like deposits and application fees.
Not sure what child care costs in your area? Ask around your friend group or local parent group to get a sense of what day care, a nanny or other arrangements cost.
You can also build other baby essentials, like diapers, formula and wipes, into your budget now, making an educated guess. It doesn’t need to be perfect; you can adjust down the road.
AUTOMATE BILLS AND CREDIT CARD PAYMENTS
Set any recurring bills to autopay, ideally from one account or credit card. If you can, go one step further and set that card to autopay, too.
Carly Campbell , a blogger and stay-at-home mother of two, says this was one of the best things her family did before welcoming their first child.
“All the various bills were taken care of without our active attention,” she says. “We only had to check the bank account once per month to make sure there was enough for the lump-sum payment.”