According to the US Department of Agriculture, a middle-income family raising a child born in 2015 will spend $233,610 through the age of 17. If you’re expecting a baby, are you prepared to invest over $13,000 a year until the child goes off to college? We have 5 tips to help you financially prepare for the arrival of your bundle of joy.
Before the Birth
From the moment you find out you’re expecting, start thinking about the basics. What’s the average cost of delivery in your area and how much will insurance cover? Do you need nursery items? Baby showers are a traditional celebration, so don’t feel bad accepting gifts! Some items you will need include:
- Crib
- Changing Table
- Rocking Chair
- Stroller/Carrier
- Clothing
- Diaper
You can also use hand-me-down items from older parents who have kept old baby furniture, blankets and clothes in good condition.
Employee Benefit Plans
Does your work offer health, disability and life insurance? If you’re already enrolled in a plan, you will have to make amendments to include your child. Parents pay thousands of dollars in medical expenses for the first few years of their child’s life, so make sure you have a comprehensive health insurance plan that meets your needs.
If you were injured on the job and had to take leave, is there a sufficient second income to cover all expenses? Disability insurance can provide benefits to supplement lost wages and help keep your family afloat during a difficult time.
Life insurance should also be in place in the event of a sudden illness or death. Rather than leaving your family with unpaid medical bills and funeral costs, personalized life insurance coverage takes away some of the stress and ensures your family is cared for.
To Work or Not to Work
Whether or not you choose to go back to work is a personal decision, but let’s look at the financial aspects. Can you afford the expenses of a new baby on one income? It may be easier for families who have grown a substantial nest egg, versus those facing debt.
If you do go back to work, consider the cost of daycare. For some families, it makes since to have one working and one stay-at-home parent, as childcare costs can vary greatly by area.
If returning to work part-time, understand you likely won’t be offered a healthcare plan. Is your partner enrolled in an employee-sponsored program that benefits growing families?
Saving for College
Although it seems you’ll be in over your head with new expenses, it’s never too early to start saving for your child’s college education. Get started on a monthly investment program; no matter how small the contribution, it’s better than nothing! College costs are on the rise, so the more prepared you are for the future, the less debt your child will face post-graduation.
If you predict you’ll be applying for financial aid, put the college savings account in a parent’s name. Opening an account in your child’s name has tax benefits, but you completely entrust the money to them and reduce your chances of eligibility for need-based financial aid.
Estate Planning
When your child is born, establish a will or update an existing one. Estate planning can be an uncomfortable process for many people, but it’s best to be prepared in the event of your death. Rather than relinquish your assets to the state, make sure everything is split how you want between your “heirs” and name a legal guardian for your children.
At Ion Bank, we understand the importance of saving for every stage of life. To learn more about our different savings vehicles, contact us today!