Starting a family changes everything — and not just your body, your sleep schedule, and your free time. Having a baby also has a huge impact on your finances. As soon as you learn you’re pregnant, you have to start budgeting for doctor’s appointments, cribs and car seats, diapers and bottles, and everything else you need to provide for a baby.
Reworking your budget takes some effort, but it’s just the start. These are the other big financial planning steps you need to take when you have a baby on the way.
Assess Your Health Insurance Coverage
Maternity care and childbirth are essential health benefits, which means they’re covered under all qualified health plans whether you buy insurance coverage through the health insurance marketplace or outside it. However, that doesn’t mean your healthcare is free of charge. Before receiving coverage for maternity care, women must meet their plan’s deductible and pay any cost-sharing requirements.
Switching to a plan with a lower deductible could save you money on maternity care. However, if you’re currently insured, you can’t switch plans until the open enrollment period. While having a baby is considered a qualifying life event, becoming pregnant isn’t. Even if you can’t switch plans before your baby is born, it’s important to know what your insurance covers and what you’re responsible to pay so you can budget for pregnancy care accordingly.
You can, however, enroll in Medicaid or CHIP if you qualify. Even if you weren’t eligible for these low-cost health insurance options before, your pregnancy may change your eligibility status.
Once your baby is born, be sure to add him or her to your insurance policy within 30 days. If you want to change insurance policies, you can do so at this time.
Plan for the Unexpected
Protecting your child means planning for everything — even the things you hope never happen.
An emergency fund lets you cover unplanned expenses without going into debt. When your child gets sick, the family vehicle breaks down, or you end up temporarily out of work, an emergency fund keeps your family afloat. Most experts recommend an emergency fund big enough to cover three to six months of expenses.
In addition to a healthy emergency fund, all parents should have a life insurance policy. In the event that one parent dies unexpectedly, life insurance provides money to cover medical and funeral expenses, eliminate debts, and pay household expenses while your family recovers from the loss. If both parents pass away, life insurance provides for your child’s future.
Since most singles don’t need life insurance, this is likely your first introduction to the wide range of policy types and coverage options out there. It may seem confusing at first, but buying life insurance shouldn’t be a hassle. Most parents only need a term policy, not whole life coverage, and you can use online calculators to determine how much coverage you need so you never have to step foot in an insurance agent’s office. What’s more, the monthly premiums won’t break the bank. According to Haven Life, healthy individuals often pay anywhere from $20 – $50 per month for monthly premiums.
The final piece of the puzzle is a will. Even if you have minimal assets, you need a will to name guardians for your child in the event that you or your spouse are no longer around to provide care. LegalZoom explains the ins and outs of writing a will when you have minor children.
Avoid Becoming House-Poor
Having a baby means you need space for a nursery, playroom, and more — or does it? Upsizing your house can make life more comfortable, but only if you can afford it. Otherwise, your mortgage payment could eat up so much of your budget that you don’t have money for important things like saving for college and retirement. Babies don’t mind living in tight quarters, so consider keeping your house for a couple of years and saving that extra money instead.
There’s a lot to accomplish before bringing your first child home. No matter how busy you get, don’t let these important financial planning steps fall to the wayside. By taking care of financial matters before your baby is born, you can welcome your child knowing your future is secure.
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