Congratulations if you just learned you were going to add a child to your family! Congratulations, too, if you are thinking ahead about starting a family and preparing to be a great parent. That includes getting your finances in order to better afford this new addition.
 
Let’s start with a big, scary number: $250,000. That’s the most recent average cost to raise a child through age 17. That’s without buying a car and car insurance or paying for private school.
 
The nice thing is that you don’t have to have all that money upfront. But you do need to be prepared to spend around $12,000 a year extra! That’ll be for health insurance clothing, food, housing, and other childhood necessities.
 
First year expenses can be nearly double that yearly amount. The cost of diapers and wipes, formula and baby food, clothing, bed and bedding, stroller, car seat, toys and books all adds up.

Additional Child Expenses and Considerations

Another first year expense is medical, including insurance and doctor visits. And then there is childcare (including the loss of income if one of the parents stays home with the baby). Any help you can get for gifts or hand-me-downs, generous friends, or relatives can be a bonus!
 
But before you panic, take a few minutes to review some of the ways you can prepare right now. Then you can enjoy the baby without worrying about your finances.
 
One initial step is to check on your health insurance benefits. Check if prenatal care, delivery, and hospitalization are included in your policy.
 
Also, ask your provider about typical out-of-pocket expenses and co-pays.
 
This way you know what, if any, costs you may have upfront. It also eliminates one more thing to remember once your newborn arrives.
 
There are laws governing hospital stays following delivery that health insurance must allow. So read carefully the provisions of your policy.
Child playing with toys on a blanket on the ground.

Changing Your Health Insurance

Next, you have up to 30 days following birth to enroll your baby in your health insurance plan. But it is a good idea to do it in advance of delivery.
 
If you don’t have health insurance, you can enroll even if it is not the typical enrollment period. The birth of a baby qualifies you for a special enrollment period.
 
The 30-day timeline for health benefits enrollment also applies to adopted children. Most insurance policies consider having a baby a qualifying event. They’ll allow you to change your health coverage.
 
Having a baby usually means delivery of the baby not becoming pregnant. Check your policy for details or ask for clarification from your HR representative.
 
This is also a good time to review your life insurance policy or policies. If you are single, you may not have opted to purchase your own or take advantage of employee life insurance. But with a dependent now on your horizon, life insurance becomes more relevant.
 
Already have a policy? Consider if you need to increase your coverage or type of coverage for added security. Also, review your life insurance beneficiaries. Make sure it reflects any changes in your decisions.
 
It is relatively easy to make changes to a life insurance policy. So make your decision on what you need right now and plan to review it every few years or if something changes.
 
Once you review and plan for health, medical and insurance costs associated with the new baby, you can concentrate on a few empowering financial decisions and actions that can ease the transition from single or couple finances to family finances.

Review Your Budget

Let’s assume that you have a budget for your income and expenses, even if it is sort of casual. Now that you are preparing for a change, it’s the perfect time to re-evaluate your expenses.
 
How are you going to accommodate the addition of baby items to your grocery bill? What about childcare once family leave ends? Or, if one parent is going to stay home for a few months or years, make adjustments to the income side of your budget.
 
If childcare is part of your plan, review costs and research options as soon as possible. Infant care can cost hundreds of dollars a month, throwing your entire budget into chaos.
 
Transportation and housing costs may change as well as entertainment and travel expenses. In addition to making some changes to budget categories, you may want to review your debt goals.
 
It may sound crazy to double down on repaying your debts when you are about to add a significant amount of spending (and maybe additional debt) to your budget.
 
Often, adults feel a stronger desire to cut or reduce debt as quickly as possible in anticipation of starting a family.
 
Remember, too, it is much easier to cut costs and adopt frugal habits before adding children. That’s especially true before they are able to point to all the items they want you to buy. Take a realistic look at your spending. See how you can pay down existing debt to prepare for this next stage in your life.

Concentrate on emergency and maternity funds

These two funds can be lifesavers for all your new adventures ahead. It may turn out that you have to get all new tires while you’re saving for your child! Wouldn’t it feel great to know that a situation like this one won’t throw you into panic?
 
Your emergency fund is a key item you contribute to each month in your budget. You should move towards savings to cover at least a few months of income. Even if you can only add a little bit each month to an emergency fund, it will reward you when you most need it.
 
Saving for maternity and baby expenses can also give you peace of mind. If it feels impossible for you to do either of these actions right now, set a time in the next few months. It could be your baby’s three-month birthday.
 
Use this time to start a savings goal with a defined contribution. It’s a gift to you and your child—no matter what.

Preparing Your House for Children

This idea is most practical if you are not expecting a baby in the next month or so. If children are in your future, why not practice now living as you think you will when that future arrives?
 
Making budget adjustments based on adding a child before it happens may help you see immediately what you need to do to be able to live within your budget when it happens.
 
The more time you have to practice living with a baby-adjusted budget, the easier life can be. Talk to your friends or family about their adjustments and financial issues after a baby. They can give you insights into what may be ahead for you.
 
Many new parents rely on support groups, either in person or through online media. There is no shortage of these groups. Some are pretty specific about the issues under discussion.
 
One of the best things about online groups is that you are anonymous. You can ask questions, get advice, or share concerns.
 
Groups abound on general parenting topics, such as breastfeeding, stay at home dads, parenting multiples (twins, triplets), single moms, and even for more experienced parents, such as dealing with specific health and behavioral issues or the financial issues of adult children.
 
Unless you’re an expert or a qualified professional is moderating the group, keep this in mind. Remember that most of the participants are only offering their experience. They’re not necessarily providing knowledgeable advice.
Young couple sitting on a couch with a newborn.

Paying for Child’s Preschool and College

It seems crazy to think about saving for your newborn’s college education already! The baby can’t even sit up yet or you are still paying off your own college debt.
 
But financing a college education is much easier if you do it a little bit at a time. For example, $25 a month starting at birth rather than trying to catch up when your child is a senior in high school.
 
Usually by the time a child is two or three years old, parents are looking more closely at school options. It includes preschool, public, and private school.
 
Again, talking to neighbors and friends about their experiences is a good place to start. They can help you with neighborhoods or public schools.
 
Families often make decisions about where to live based on the public schools in an area. Once you have done some initial research, take the time to visit the schools you are considering.
 
Both public and private school administrators are used to meeting with parents. They discuss their questions and concerns about education.
 
In some areas, parents put their child on waiting lists months or years in advance of attendance. Think about what you value in education for your child. Then investigate schools in your area that match with what’s important to you and what you can afford.
 
It is a lot to think about, consider, and act on when you are starting a family.
 
Whether you are having your first child or adding siblings to your family, consider your finances.
 
It is impossible to plan for every contingency related to parenting. But taking time to review and improve your financial situation can free up time.
 
You can then bond with your child and enjoying the delights and pleasures of parenthood!