Baby on the way? Steps to take to prepare financially
Sept. 29, 2023
3 min read
What we'll cover
Ways to financially prepare for a baby
How to create a baby budget
Planning your estate
Get ready to embrace the whirlwind of parenthood. As you gear up to welcome your bundle of joy, it's prime time to get your finances in check. Welcoming a baby brings a series of responsibilities, including the task of ensuring your financial stability. From budget adjustments to setting up an emergency fund, this checklist is your ticket to navigating the financial side of parenthood.
1. Prepare for arrival
Creating a baby budget isn't just about diapers and onesies – it's about setting the stage for a solid financial future. From crib to college fund, these steps are all about mapping out your spending and ensuring your budget acts as your financial GPS. Start a dedicated savings account for baby-related expenses. Set a monthly savings goal and explore high-interest savings options. Lay the financial groundwork now for a smooth transition into parenthood.
Parental leave policies vary between employers and regions. Before your baby arrives, understand your workplace's policies regarding parental leave. Be prepared for potential income reductions during your time off. Factor this into your budgeting process and consider how your existing savings and accrued vacation days can supplement your leave.
Start a fund for unpaid leave
If unpaid leave is your only option, try to put away some money before your baby arrives. When payday comes, try to set aside as much of your paycheck as possible. Our buckets tool could be the answer to how you organize your money in your Ally Bank Savings Account. It's great for keeping your funds separate from your other savings.
Necessities vs. luxuries
Differentiate between essential expenses and non-essential items. Make a comprehensive list of baby essentials such as a crib, stroller, car seat, diapers and clothing. It may not be a bad idea to consider purchasing gently used items or accepting hand-me-downs from family or friends.
2. Post-baby: Adapting to new realities
After your little bundle of joy arrives, your financial landscape will need a significant transformation to adapt to the evolving needs of your growing family.
Revise your budget
With a new member in the family, your monthly expenses will inevitably shift. Review your budget categories and consider the following adjustments:
Diapers and essentials
Another significant expense working parents might need to plan for with a new baby is childcare. You have lots of options available to you that will fit all sorts of budgets, including daycare, a nanny, babysitters, and/or help from friends and family. Consider which one is the best fit for you and your needs based on your budget and the kind of care you're looking for.
3. Save early - and often
When thinking about all of the child-related expenses, a college fund is probably at the top of your list. While it might feel premature to be thinking about college already, it's likely one of the most substantial costs you'll encounter as a parent, so it's good to get started early.
By considering trusts and life insurance, you're creating a safety net that can protect your family's future even during challenging times. Consult with legal and financial professionals who specialize in estate planning and insurance to ensure that your choices are well-informed and in the best interest of your family.
Having a baby is a joyous event. But, at times, new moms and dads can feel like they're flying by the seat of their pants. So, remember to seek guidance if you need to and adapt to your situation as needed.