Baby on the way? Congrats! You're probably busy decorating the nursery, deciding on names and getting everything you need from bottles to a bassinet. Amid all the excitement, you may also notice the bills and costs are already adding up. Fortunately, with some pre-planning, you can take steps to help financially ease into your new family structure.
First flutter finances: Setting the stage (Weeks 1-13)
The first trimester is a good time to start building a solid financial foundation.
Assess your current finances: Review your income, existing expenses and any outstanding debts to get a clear snapshot of your current financial situation. Understanding current cash flow helps identify areas to adjust your budget for new baby costs.
Review parental leave: Research both your and your partner's parental leave policies to understand the length of time you'll have, as well as what is paid and unpaid.
Draft a baby budget: Outlining a baby budget this early doesn't need to be perfect, but it helps shift financial priorities. Start by estimating all baby-related costs, both short-term and long-term, from prenatal care co-pays and car seats, to childcare and diapers.
Fortify your emergency fund: Unexpected costs are inevitable with kids. A robust emergency fund, ideally covering three to six months of living expenses, offers a critical safety net for unforeseen costs. If you don't have an emergency fund, start building one—every little bit gives you that much more peace of mind.
Strategize debt repayment: If you carry credit card debt or other loans, make a plan to tackle them. Reducing high-interest debt now frees up future cash flow for baby essentials.
Read more: How these smart savings tools help grow your savings
A robust emergency fund, ideally covering three to six months of living expenses, offers a critical safety net for unforeseen costs.
Mid-bump money moves: Second trimester savvy (Weeks 14-26)
As pregnancy progresses, the second trimester is ideal for deeper planning and research.
Research childcare: Childcare can be one of the largest ongoing expenses. Now is the time to research childcare options in your area to understand costs, availability and waitlists.
Optimize insurance coverage: Your insurance needs will notably change. Review your health insurance policy to understand maternity coverage and the process for adding your baby to your plan. This is also a good time to evaluate if life insurance is right for you, as it can provide vital financial protection for your family should the unexpected occur.
Plan long-term: It's never too early to consider saving for your child’s future, and there are a variety of ways to do that.
Set up a 529 college savings plan: These tax-advantaged investment accounts help plan for future educational expenses. Starting early can help leverage compound interest.
Open a custodial savings account: A Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) custodial account allows an adult to help manage assets for a minor. These funds will eventually be transferred to the child when they become an adult, according to their state’s age of majority.
Prepping for the main event: Third trimester fine-tuning (Weeks 27-40)
The final stretch often ignites nesting instincts and a desire to finalize preparations. Now's the time to focus on practical readiness and tie up loose ends.
Connect with a financial advisor: If you don’t have a financial advisor, now may be a good time to establish a relationship with one, as they could help you navigate future planning and expenses.
Refine your baby budget: Revisit your baby budget, debt repayment and savings goals you reviewed in your first trimester to make any final adjustments.
Prep for your hospital homecoming: The first few weeks with a newborn can be a whirlwind, so make it as easy as possible by batch-cooking freezer meals. You can also buy certain non-perishable essentials in bulk, such as diapers, wipes or formula.
More than 9 months: A flexible approach to parenthood and finances
The financial journey through pregnancy and new parenthood is dynamic. Be prepared to adjust your budget and plans as your family's needs evolve. The goal isn't perfection, but rather establishing a stability that allows you to cherish every moment with your new little one.
