This post is sponsored by First Alliance Credit Union
The biggest life transition you will ever go through is becoming a parent. Whether it was planned or a complete surprise, whether it’s your first or your third, adding a new person to the family means changes are coming to every area of your life, especially your money.
This may be a fact you are fully aware of, or maybe it’s the first time you’ve considered the impact bringing a baby into your family will have on your finances. Either way, how you plan and prepare for the unavoidable financial changes that come with adding a new person to your family will make the difference in how prepared you feel to earn the title of Mom (or Dad).
Here are three of the biggest expenses that come with having a baby, and how you can prepare to be able to handle them now, instead of trying to figure it out when you’re on zero hours of sleep.
The Hospital Bill
Typically, when you first learn you’re expecting, you start thinking about all the cute baby things you get to buy and the furniture for the nursey. What you might not consider is how much giving birth will cost.
The average price of giving birth in Minnesota last year was between $6,994 and $15,646. Your actual out-of-pocket costs will depend upon if your birth is typical or complex, and whether delivery was vaginal or via c-section. It can also depend on where you give birth and what types of pain management you chose during labor.
For many, your insurance will cover a large portion of this cost. However, depending upon your coverage plan, you can end up owing thousands of dollars for the medical care you receive. To prepare yourself for this upcoming medical bill, take time to fully understand the amount you’ll be required to pay out-of-pocket. This will mean reviewing your health insurance coverage for your deductible, co-payments, and whether the hospital or birth center you choose is in-network for your insurance provider.
Once you have a ballpark idea for your out-of-pocket costs, you and your partner can begin formulating how you will pay off this debt before baby arrives so you’re not stressing when you receive the bill. You’ll already have a plan in place! This is also a perfect time to determine how much your health insurance premiums will increase once you add your new baby on to your health plan.
Key takeaway: Know your out of pocket costs and build a payoff plan into your budget before the bill arrives.
Child Care Costs
It’s no secret that child care is expensive. If you’re planning to return to work after giving birth you need to start thinking about how you will afford this new expense sooner rather than later.
The average cost for child care in Minnesota ranges from $133 per week to $310 a week. That’s between $6,916 annually and $16,120 annually respectively. The cost of care will change based on whether the day care is in-home or center based, and if you need full-time or part-time care.
You can start preparing yourself for this recurring cost by starting to set aside the cost of child care into savings account. This will help you start adjusting to your new family budget before baby arrives. Plus, you’ll start building up some savings to help pad your account to cover your current bills while you’re on maternity leave at the same time.
The same advice applies even if you’re planning to not return to work. Soon your household income will decrease significantly, and it will be important to begin saving as much as possible before you leave your job.
Again, starting to pull back on your spending and readjusting your budget now will lessen the impact once baby arrives. This way, you are not trying to adjust to your new life as parents while simultaneously trying to figure out how to afford your new baby-centric lifestyle.
Key takeaway: Take the amount you’ll pay for child care and start putting that amount into a savings account before baby arrives.
All the Little Things
Of course, all the little things add up too. From diapers and wipes to car seats and strollers to breast pumps and formula, those individual items can add up to one hefty price tag.
The average cost of basic baby supplies is $2,700. That includes nursery furniture, travel supplies, feeding supplies, clothing, diapering supplies, and toys. Even if you have items from previous children, you will still need to purchase many things again. Items like car seats expire and reusing the same crib is great savings, but it might mean you need to instead purchase a “big kid” bed for an older sibling.
It will be important as you start to accumulate all these items that you’re thinking about purchasing them strategically, especially if your budget is already tight.
For instance, don’t put all these items on a credit card. After all, you will soon have large medical bills and child care costs to pay for. The last thing you need is having to pay off extra credit card debt.
Instead, sit down with your partner and make a list of the items you need and want, as well as when you’ll need to purchase them. For example, you will need a high chair but not until your baby is closer to four or five months. This is an item that you may be able to purchase later. Knowing this will free up money so you can purchase a more pressing item first, like a car seat.
Additionally, while it’s fun to look at all the baby toys, think about what you realistically need when baby is first born. A play mat may be more appropriate than a walker, for instance. Thinking this way can help you avoid feeling financially stressed before baby arrives while still having the items you need to be prepared to properly care for your little one.
Key takeaway: Make a list of the items you need and create a budget to keep yourself from going into unnecessary debt
Get Help Planning Your Budget for a New Baby at First Alliance Credit Union
Bringing a tiny new life into your family is an exciting time, but it can also be very stressful. To keep your stress levels at a minimum during this big life transition, the best thing you can do for your growing family is to be financially prepared.
If you want a little guidance as you and your partner prepare your finances for a new baby, talk with the experts at First Alliance Credit Union. Whether you’re looking for ideas on how to pay off hospital debt, opening a savings account for your maternity leave, or creating a budget so you can afford all the gear that baby will need, the friendly Member Advisors at First Alliance Credit Union are available to support your financial goals and make your journey into parenthood even more enjoyable. We even offer virtual appointments so you can talk with us from the comfort and safety of your own home.
Plus, make sure to check out our presentation at Bloom – an event for new and expecting moms – where Danielle Sommerfeldt, First Alliance Credit Union’s Commerce Drive Branch Manager, will be sharing more information on planning for your baby-centric budget.