You know the song. First comes love, then comes marriage, then comes baby in a baby carriage — and a whole slew of new financial responsibilities. (Ok, we added that last part.)
When a baby is on the way, there are a lot of things that new parents are worried about. Birthing plans, cribs, car seats, nursery paint colors… there’s a lot to decide in just nine months, sometimes less! One task you shouldn’t put off? Your finances. We’ve put together a new parent checklist with the top five financial tasks to get done when preparing for your new baby.
1. Create your baby budget
It’s no secret that babies are expensive. New parents can expect to spend up to $12,000 in the baby’s first year alone.
Rather than bury your head in the sand, reevaluate your budget (or create a budget — it’s never too late!). What are some ways you can cut expenses now to add more money to your savings? Is your household going from two incomes to one? Taking time to do this before the new baby arrives is one less thing to worry about in the first months of parenthood, though we can’t guarantee you’ll get more sleep.
2. Review your emergency fund
How much do you have in rainy day savings? Can you cover at least three months’ worth of expenses? Can you even cover one month?
Life is full of surprises, and who knows what kind of shenanigans your little one will get into when they get the chance. Whether it’s for a job loss or a medical emergency, save as much as you can before baby arrives.
3. Understand your health insurance
To say that health insurance is complicated is an understatement. Review your coverages and deductibles. Find out which hospitals and doctors are in-network, and determine how much you’ll need to pay out of pocket for the hospital stay and beyond. For reference, the average cost of having a baby is $8,802, including prenatal, delivery, and postpartum care.
If each parent is on their own health insurance plan through their employer, figure out how much it would cost to add your baby as a dependent on either plan. And find out when you need to add baby as a dependent. The last thing you want to do is miss a deadline and pay out of pocket for what would have been covered by your insurance. Usually you have 30 days to add your new baby to your health insurance plan, so don’t delay. In fact, you could set a reminder right now for the day after the due date.
4. Update (or buy) term life insurance
One important responsibility as a new parent is finding an affordable way to ensure your family is taken care of if the worst case scenario were to happen. How much would your dependents need should you pass away? Scary thought we know… but important to prepare for.
A main barrier to buying life insurance is the cumbersome and lengthy process just to get it. Figuring out where to begin, shopping around, listening to sales reps, scheduling in-person interviews, undergoing medical exams — all of these are part of the traditional process before the insurer determines if you’re eligible to be covered and how much you’ll be expected to pay in premiums.
With Bestow, our technology and data-driven approach eliminates the headache of trying to buy a life insurance policy. We’ve simplified the process so that it can take as little as 5 minutes to buy term life insurance, and you can do it all from your phone (it’s about time right?). No interviews, paperwork or medical exams required.
Also, if one parent will be taking care of the baby full-time (like a stay-at-home mom or dad), that parent should also look into getting coverage. Taking care of your baby is a full-time job and there’s a significant financial impact if something were to happen to either parent.
5. Write (or adjust) your will
If you don’t already have a will, getting one as a new parent is essential. Not only will it distribute your assets according to your last wishes, but you can appoint who will be the legal guardian of your baby. If you don’t, the government can determine all of the above. Yikes!
Websites like LegalZoom, Nolo, and Rocket Lawyer are a great option for those who prefer to do it themselves. However, consult an attorney if your situation or assets are little more complicated.
So, while it’s fun to pick out new clothes and toys for your new arrival, don’t underestimate the importance of getting your finances in order, too. Our new parent checklist with finance to-do’s is a great place to start the conversation and guide you through the process.