Along with the new addition to your family will come financial changes. Not only do you have to adjust to being a new parent, but you also have to adjust to your new financial situation. In 2015, the U.S. Department of Agriculture reported that the average cost of raising a child from birth to age 18 was $233,610. However, when adjusted for the current inflation rates that number rises to $290,014 in 2022. Not only do you have to start preparing the nursery, but also your finances. Continue reading to learn what to financially expect when you’re expecting.
Adjusting Your Budget and Lifestyle
No matter if you are expecting or not, you should have a monthly budget that you operate from. A budget becomes essential when you’re now providing for a child. Start by analyzing your current budget and spending to see where you can cut back. A few common spending cutbacks are eating out, traveling, and shopping. In lieu of this spending, you’ll be purchasing diapers, wipes, formula, clothes, and more for your child.
Saving For Emergencies
It’s inevitable that you will have an unexpected bill or expenses pop up, especially once you’re a parent. To prevent an emergency from putting your finances at risk, build an emergency fund. You should aim for your emergency fund to be three to six months’ worth of living expenses depending on your employment and income circumstance. To start saving, you can incorporate a contribution to the emergency fund as part of your monthly budget.
Increased Health Care Costs
Your child will need to be added to your health insurance plan within 30 days of the day they were born. If you wait too long, you will end up forfeiting coverage. You can backdate the coverage to cover any eligible care that your baby received in the hospital during and after birth. However, you do not want to wait until your baby is born to look at your coverage options. Instead, begin looking early to make sure you’re prepared to add your child to your health insurance plan.
Along with your child, the mother will need care throughout the pregnancy and during the birth. Once you find out that you’re pregnant, check with your health insurance provider to see what your coverage is for prenatal visits, if your hospital stay will be covered, if your policy covers other providers at the hospital, what is your deductible, and how is your deductible applied. While you may receive coverage in all of these areas, you could still end up with a hefty medical bill. Throughout your pregnancy, consider starting to set aside money to cover these health care expenses.
Lower Income During Parental Leave
Some employers offer paid or partially paid parental leave. However, this is not required by law. You may qualify to take leave through the Family and Medical Leave Act (FMLA) if you have worked at least 1,250 hours for your employer, been with your employer for at least 12 months, and your employer has at least 50 employees. FMLA leave is up to 12 weeks unpaid with continued health insurance coverage and the requirement that you receive the same or an equivalent position when you return to work. If you do not qualify for FMLA, you may have to utilize your sick days, vacation days, or disability insurance. This is important to research and know prior to your child being born. Consider contacting your Human Resources department early on in your pregnancy.
If you will be experiencing a change of income while you are on parental leave, it’s important to plan ahead so you can have money set aside in advance to use while on leave.
Navigating your new financial situation as a parent can be difficult without a knowledgeable financial advisor on your side. Our advisors at Plan A Wealth Management are here to help. Schedule your consultation with us today.