For most families, having a baby is a time to rejoice and celebrate. However, don't be surprised if your joy is tempered by money worries. As your family grows, you move into another life stage, one with additional expenses. Identifying the many ways a baby affects your finances will help you plan ahead. This lowers the likelihood of missed payments that negatively affect your credit score. It can also lower stress levels and let you focus your attention on your newest family member.
Though the Department of Labor's Family Medical Leave Act says your employer must give you at least 12 weeks off to recover from and care for a new baby, they don't have to pay you while you're off. Do you have short term disability insurance at work? Check the fine print as it may cover part of your income for a period after childbirth. Start saving now to cover the income shortfall of your time off, or adjust your spending to live on one income if either of you decide to leave work permanently after your baby arrives. Planning ahead can help you avoid running up large credit card balances, which can lower your credit score.
Child care is one of the biggest expenses for two-career families. Start researching local child-care costs as soon as you become pregnant. Calculate how the added cost will affect your monthly budget, and prepare to cut costs in other areas if needed.
As your family grows, you will likely need more room. You may have to save or borrow money to renovate or move to a larger home.
Having a baby means buying or borrowing many baby-related items. New parents face many new expenses, such as the purchase of car seats, cribs, diapers, clothing, toys and baby food. Budgeting for these expenses, buying used, and borrowing can help keep your costs down.
A new family member will need additional health insurance premiums. The Insurance Information Institute suggests parents compare costs, co-pays and coverage under each of their employer health plans to pick the best coverage for the least amount of money. The premium will increase your monthly expenses.
The financial responsibility of children lasts at least 18 years, and often longer. Along with the day-to-day costs of raising kids, many parents increase their savings to start college education funds for their children. Even if you can only save $50 a month, start as soon as possible. The power of compound interest will help your savings grow, reducing your child's dependence on student loans.