How To Financially Prepare For A Baby On A Budget

Are you expecting or thinking about having a baby? If you are, I’m sure it’s crossed your mind on how to financially prepare for a baby.

Nothing can be more life changing than adding a baby to your family.  For most people who’ve already had babies, you know that this might even be an understatement.  Babies are gifts from heaven…an immeasurable blessing.  And once you get over the euphoria of finding out you’re expecting, a little bit of reality starts to creep in and if you’re not careful, it can scare the crap out of you!  So many questions!  What to do about this or that!  Can I afford to stay at home or will I return to work.  If I do choose to go back to work, who’s going to keep my baby?  When should I start saving for college? Can we even afford to have a baby?  Now may be the time to ask yourself how to financially prepare for a baby .

how to financially prepare for a baby

Slow down and enjoy the moment.  Every thing will fall into place, but it is certainly a good idea to try to plan ahead as much as possible.  There are numerous things to think about when you’re expecting and it can sometimes be overwhelming.  Don’t let the overwhelm get in the way of this joyous occasion.  I have a few tips to offer you on how to financially prepare for a baby and otherwise.

Get On A Budget!

Whether you are pregnant or just thinking about getting pregnant, it’s a good idea to start living on a budget.  Your budget is your roadmap to success and wealth.  Adding a baby to the family is even more of a reason to get right with your finances.  You need to know where your money is going in order to make it start working for you.

It takes about three months to get the budget right.  Starting early will ensure that you have it down long before baby gets here.

Put Baby and Mom In the Budget

While you’re making your budget, it’s a good idea to make a line item for “Baby” and “Mom”.  Mom will be needing things to wear.  You can only use a pony tail holder to expand your jeans for so long.  I always hated to spend much on maternity clothes, so I would hit my favorite retailer’s sales.  But my favorite places to shop for the clothes that I only wore for 5-6 months, was thrift shops and garage sales.  I also did some exchanging/swapping with friends that had maternity clothes.

Don’t forget that as an expecting Mom, you may be trying to eat healthier and more frequently.  Allow a little more in the grocery budget for this.  This is also a great time to try your hand at meal planning and a making freezer meals.  This can save you a bundle with the groceries!

As far as baby goes, I remember how exciting it was to plan and decorate the nursery.  I also remember that there were things that I thought I just had to have…at the time, only to find out later, that some of these “necessities” were totally unnecessary.  Look to other moms who have been there and ask their opinions on things.  Take a poll if you have to and find out what’s really necessary.  You only need so many blankets and baby toys.

The one thing you will definitely need is diapers.  If you decide to go with disposable diapers, start stocking up on them as early as you can.  Buy a few packages each month and you can also ask for them as shower gifts.  Make sure to ask for different sizes, too.  Remember…babies grow FAST!

Get Out of Debt

While you’re making your budget, now is the perfect time to look at your whole financial picture.  Sometimes, this is the hardest part.  Facing the cold, hard facts of how much debt you may be in.  But I can honestly tell you that ignoring it will not make it go away.  It can actually make your situation worse.  It can be a cold splash of water in the face to see what our real situations are, but the sooner we face reality, the faster we can begin changing things.

The amount of debt you have can also be a determining factor for how long you can stay home with baby or if you will be able to stay at home indefinitely.

While pregnant, though, this is a step that you can temporarily put on hold, until after the baby is born.  I’ll explain more about this in the next section.

Start Saving, ASAP!

When you find out your pregnant, you may be in the process of paying down debt, saving for a downpayment for a house or any other numerous things.  My favorite financial guru, Dave Ramsey, suggest putting everything on hold and save as much as you can until baby gets here and both Mom and Jr. are home from the hospital.  Once you know for sure that everyone is fine, then you can pick up where you left off with Dave’s Seven Baby Steps.

For example:  If you’re in the middle of your debt snowball, take the money you saved during pregnancy and throw it at the debt (once you’re home from the hospital).  If you’re out of debt, but you’re beefing up your emergency fund, leave at least 3-6 months of expenses in the savings account, then move on to the next baby step.

Make or Adjust Your Will

None of us want to think about death, but unfortunately, it’s a fact of life.  None of us will get out of this alive.  We all hope that it’s later rather than sooner, but we need to be prepared, no matter what.

Everyone over the age of 18 needs a will and if you have children, you REALLY need a will.  The main reason for this is so that YOU and not some court, will be able to decide who will become your child’s/childrens guardian in the event of you and your spouse’s death.

RELATED ARTICLE:  Estate Planning Basics For All Ages

If you can’t afford to go to an estate planning attorney, US Legal Forms has Will kits that you can purchase for your State and are very reasonably priced.

There’s also a Family Law Legal Planning Kit available from Amazon.

Life Insurance Is A Must!

I don’t think there is a better way to let your family know how much you mean to them than making sure they are taken care of in the event of your death.  Term life insurance has been the route we have taken in years past.  It’s super affordable and all you are paying for is insurance…plain and simple.  Stay away from Whole Life or Universal Life.  You don’t want to ever use an insurance policy at a savings vehicle for you or your child.  The rate of return is awful and they tend to be expensive.

Do your own investing or speak with someone you trust and is in the business of investing.  That’s what they do.  Don’t use a life insurance salesman as your financial planner.  Chances are, he won’t be an expert in that field.

Review Your Health Insurance?

If you have health insurance, that’s certainly a blessing.  It’s very important that you know exactly what your health insurance plan does and doesn’t cover.  There are things like co-pays, deductibles, max out-of-pocket expenses, out-of-network costs and what’s the percentage that your insurance covers.  Many are 80-20%.

Knowing this important information will enable you to budget where you need to, like how much you’ll need to save and have paid before baby gets here.

If you don’t have health insurance, you will need to work some sort of payment plan out with your doctor and the hospital.  I strongly suggest for you to shop around and even do some negotiating. There’s no harm in asking for a discounted rate.  Doing this sooner, rather than later, will alleviate so much stress and worry and will also give you time to do some much needing planning and saving.

Staying At Home or Day Care?

Once you find out that you’re expecting, you may find yourself in turmoil over whether you can be a stay at home parent or needing/wanting to work outside the home.  It can be a huge decision to make.  Usually, the number one question we ask ourselves is “can we afford it”?

Well, when I decided to come home for good, almost 30 years ago, I put a pencil to it to see if it was even possible.  I knew after my second child was born that I wanted to be at home, but I had to take a good, hard look at our finances and our lifestyle.

 

Can We Afford It?

There were several things I looked at to determine if we could afford it.  I detail how we did it in my post,  How To Become A Stay At Home Mom On A Tight Budget.

The number one expense that we would have to pay if I returned to work would have been child care.  I also looked at what I was making and what it was costing me to work.  Yes, you read that right.  It does cost to work.  Besides having to pay for day care, there was commuting cost.  That would be gas and wear and tear on the car.  There was clothing cost.  I worked in a professional office and had to look the part.

There were eating out cost, the cost of convenience with groceries…you know…sometimes I was just too tired to cook.  We were in a higher tax bracket.  Etc…etc….etc…

By the time I was finished, I was making less than $2/hr AND paying someone else to be with my child all day.  I decided right then, that I could make more of a difference with my budget by staying home with my babies.  I began looking for ways to cut expenses, bring in a little income from home and living below our means.  Suddenly, I really didn’t care what kind of car I drove or what the latest fashion trend was.

For us, day care wasn’t an option anymore.  So, I came home for good.  This may not be an option for everyone, though.  You have to look at your individual situation and determine what is right for you and your family.  No one should judge you for that.

Start Saving For College…Early!

Once you’ve covered all of the above bases, it won’t be too early to start planning for the little one’s college.  With the rising cost of tuition, no telling what college will cost in 10 to 20 years.

Years ago, we started mutual funds for our kids.  We contributed a set amount every month and had it taken out automatically.  That was way before they had ESA’s and 529’s.

Now, these education savings accounts grow tax free.  That means when you take money out, there will be no taxes to be paid!  That’s an awesome deal!!  The only caveat is that it can only be used for education and the expense that go along with that.  You can’t use it to buy a car so Jr. can get around campus.  If you do, you’ll have to pay the taxes.

There are different rules and guidelines for each one so you need to do a little research before you choose.  I would definitely recommend getting some professional advice from a financial expert in your area, but please don’t put it off for too long.  Time goes by quickly and procrastinating can be very expensive when it comes to college planning.

Final THOUGHTS…

Adding new members to the family is both exciting and overwhelming, sometimes.  You’re responsibilities may seem endless, but don’t let that stress you.  These things don’t have to be done all at once.

The best way to eat an elephant is one bite at a time.  What I mean by that is make a list of your to-do’s and prioritize. There are some things that will take priority over others.  Start with making sure you are covered, health wise and what your financial responsibilities are.  Then, you can move on to saving.  The more money you have, the less stress and worry you’ll have.

Once you know your obligations, then you can get on with all of the other preparations.

Speaking from experience, 18 years goes by in the blink of an eye.  One minute your holding your precious, little angel in your arms and the next, you’re watching them walk across a stage to receive their high school diploma.

There’s no time like the present to start to financially prepare for a baby, not only for their future, but for yours as well.   You can never be fully prepared for the life changes that come with having a baby but figuring out how to financially prepare for a baby ahead of time, will ensure that you and your family will be on the road to financial success and a life free from the financial burdens that plague our society, today.

How did you prepare your finances for having your baby?  Leave me a comment below and be sure to subscribe to Love To Frugal so you never miss a post!

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(This post was originally posted on 1/31/18 and was updated on 3/10/20.)