So you're about to have your first child, huh? Or maybe you're just starting to plan ahead. Either way, very cool! You're in for the ride of your life.
For a lot of new parents, money is at the top of the list of concerns. That anxiety is totally normal, but the good news is that there's usually less to worry about than it might seem and there are some simple things you can do to prepare.
If you'd like to put yourself in a better financial position before the baby gets here, read on. These tips will put you on the right track to be financially prepared for your first child.
Build a Cash Cushion
Having a child is going to introduce a lot of changes in your life, from how you spend your time to how you spend your money.
A cash cushion will let you navigate those changes without being overly anxious about the financial side of things. You can make mistakes and make adjustments without worrying about where the money is going to come from.
So, how can you build that cash cushion?
First, make a rough guess about how much you'll be spending each month on the baby. This tool can help you figure that out.
Then, instead of waiting until the baby gets here, start now by funneling that amount into a savings account each month. The sooner you can start doing this, the bigger your cushion will be.
Buy Only What You Need
One of the best ways to ensure that you'll spend a lot on your baby is to spend a lot on her before she even gets here.
It's easy to get sucked into the temptation to buy a lot of "stuff" for your baby, especially the first time around. When you aren't exactly sure what's important, the natural reaction is to buy everything so you feel prepared for anything.
But know this: a baby doesn't really need all that much. They won't be doing much for those first few months other than sleeping (hopefully), pooping, crying, and being held.
Buy the essentials ahead of time, but wait until she's actually here and you experience a real need before going beyond that. You'll save yourself both money and clutter.
Ahh, insurance. Everyone's favorite topic.
Look, I get it. No one enjoys paying those insurance premiums, myself included. But the truth is that good insurance is really a blessing.
It allows us to protect our families in a way that would be difficult on our own. It's actually a pretty cool little trick when it's done right.
Life and disability insurance are essentials. You should also review the liability coverage on your auto and homeowners or renters policies, and it may be worth looking into an umbrella policy as well.
And of course good health insurance will be crucial to help your prepare for your first child both before and after he arrives.
Here are two quick tips as you work through this:
- Don't assume that whatever you get through your employer is enough. There are many cases where it's not.
- If you want the help of a professional, trust the people who won't earn a commission from selling you the insurance.
Get Your Will in Place
Even if you don't have much money, a will is important so that you can name guardians for your child.
These are the people who would take care of him if both parents were to pass away. If you don't have a will that decision would be left up to the courts, so this is definitely something to handle sooner rather than later.
There are a few other important estate planning documents as well, such as a healthcare proxy and durable power of attorney. An estate planning attorney should be able to help you with all of these things for no more than a few hundred dollars.
Communicate with Your Partner
If you're doing this with someone else, there's going to be a lot of teamwork involved. And it's not always going to be easy, so the more you can talk about things the better.
Talk about your goals, your fears, your successes and your failures. Learn from each other without nitpicking. Accept that mistakes will happen and try not to beat each other up over them. Talk about them, make adjustments, and move on.
Have Someone Help You Prepare for Your First Child
This stuff can be tough and complicated, especially when you consider you have to work through it when you'd much rather think about things like spending time with your child when he or she finally gets here.
Don't be afraid to reach out for help if you don't know where to begin or if you're feeling overwhelmed. Check out XY Planning Network's Find an Advisor resource so you can browse through financial advisors who specialize in helping clients just like you who are in this stage of life.
Most of the advice here will prepare you for any bad things that might happen, and while that's certainly important the truth is that those bad things probably won't happen.
So yes, get these things in place. But then turn your focus to the joy of your growing family. This is an exciting time and having these financial priorities handled will let you enjoy it to the fullest.
About the Author: Matt Becker is the founder of Mom and Dad Money, a fee-only financial planning practice dedicated to helping new parents build happy families by making money simple. His free time is spent jumping on beds and building block towers with his two awesome boys.