How To Financially Prepare for a Baby

Prepare for a Baby

Parenthood brings so much joy and stress, and one way to limit that stress is to financially prepare for your new child before they arrive. The average cost of pregnancy and childbirth in the United States is $3,500 out-of-pocket, and the average cost of raising a child is $233,610. 

Numbers like these can be alarming for expectant parents, but taking key steps in the early years of parenthood can help you create a stable financial future for yourself and your child.  

Start an Emergency Fund  

It is impossible to predict the future, and you never know when unexpected expenses will arrive as you move through pregnancy and into parenthood. One way to ease the stress of the unknown is to start an emergency fund. 

This fund is a safety net for your family as you navigate this next phase of your life. Building an emergency fund may seem like a large task, but it can be accomplished by following these steps: 

  • Calculate your goal amount. Normally this is the equivalent of three to six months of living expenses, such as housing, food, insurance, and utilities.
  • Deposit $1,000 into a savings account to start your emergency fund.
  • Make monthly deposits into the savings account until you reach your goal. 
  • Leave the account untouched unless you are facing an emergency. 

This fund will help your family if you face unexpected medical costs or a loss of employment. With an emergency fund, you can sleep better at night knowing your family is safe, even if the worst comes your way. 

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Create a New Budget  

Budgeting is a fantastic way to improve your financial health and save money. When you create a budget, you are creating a plan for where your income will go. This practice helps you to avoid excessive spending and enables you to work towards long-term goals, like building an emergency fund. 

If you are already budgeting, that is a good start, but you’ll need to modify your existing budget to include the recurring expenses that come with having a baby in the house, including: 

  • Diapers; 
  • Formula; 
  • Food;
  • Clothing;
  • Daycare. 

Understanding these expenses is important for developing an accurate budget and making plans for how you’ll manage the costs of parenthood. 

Start a 529 Account 

For those who are expecting a baby, college may be the last thing on your mind. You are budgeting for delivery costs and diapers, but the truth is that now is the perfect time to start planning for your child’s educational future. 

When starting a college fund, 529 accounts are a great place to start. These accounts allow family members to save for their child’s educational expenses, invest these funds, and grow wealth tax-free. 

According to the U.S. Securities and Exchange Commission, 529 accounts can pay for post-secondary educational expenses, and many people associate these accounts with “college funds.” However, 529 funds can also cover public or private school tuition and educational costs as early as elementary school.  

Adjust Your Insurance Benefits Accordingly 

While health insurance enrollment is normally limited to specific enrollment periods, childbirth is considered a qualifying event that allows for policy changes outside of normal enrollment periods. 

Contacting your health insurance provider is an important step in caring for your newborn. Your child, as your dependent, will be eligible to be included in your health insurance plan, but you will need to contact your insurance company soon after childbirth to make the necessary changes. You may also be able to benefit from additional programs such as dependent-care flexible spending accounts to assist with the cost of childcare. 

Don’t Neglect Your Retirement Savings 

Budgeting for new expenses and saving for college tuition are important steps, but new parents must remember to plan for their retirement. Saving for retirement will provide you with a comfortable life in your later years, but it will also save your children the future financial stress of caring for their aging parents. 

Saving for your retirement in 401(k) and Roth IRA accounts is a great way to care for yourself and your children as you age. These accounts also provide ways for you to take advantage of tax benefits and pass generational wealth on to your children. 

How To Get Financial Assistance After Having a Baby 

There are a variety of new expenses that come with having a baby, and some families may need temporary or long-term help with managing expenses such as hospital bills, diapers, and formula. 

If you are struggling to cover these costs, there are a variety of financial assistance options you can turn to.  

Government Programs 

In the United States, the government offers financial assistance programs for low-income families, including: 

These programs help families cover the cost of healthcare and formula, giving new parents a respite from the financial struggles of parenthood. 

Hospital Financial Assistance 

If you have given birth or are planning to give birth at a nonprofit hospital, then you may be eligible for hospital financial assistance. The Affordable Care Act requires that nonprofit hospitals provide financial assistance, but the level of assistance may vary depending on the organization and the location. 

To receive financial assistance, you must:

  • Speak with a hospital representative about any available financial assistance or “charity care” programs available. 
  • Research the eligibility requirements for this program, including family size and annual income. 
  • Fill out all the required forms and provide proof of income and assets as required by the institution. 

Every hospital has different procedures, but speaking with the billing department as soon as possible is the best place to start. 

Personal Loans  

If you are facing a large medical bill after childbirth, you may consider taking out a personal loan. 

Personal loans bring many benefits and challenges, and it is important to understand the specific details of these loans before signing the paperwork. A personal loan can cover the payment to the hospital and insurance company, and break the debt into smaller monthly payments that you make to the lender. 

Download the Free Stock Loan Calculator

Your portfolio’s value can be unlocked even if you don’t sell a single share in the open market.

If you haven’t checked it out already, here is a free stock loan calculator to help you size out a loan for your shares.

Simply enter a symbol and the number of shares you own, and you’ll see a potential loan amount that we can fund quickly.

Download the free Stock Loan Calculator now

However, personal loans often include high interest rates which increase the total amount you spend. These loans, and a failure to make the payments, can have a detrimental impact on your credit score and hurt your chances of qualifying for future auto loans and home mortgages.  

Stock Loans

If you own stocks in your investment portfolio or retirement account, then you can use these stocks to cover the costs of having a baby. In a stock loan, a borrower’s stocks serve as collateral for the loan. Because your stocks provide collateral, you will not need to undergo a credit check or lengthy application process.

Stock loans provide a variety of benefits and potential drawbacks, but can provide a simple way to access needed funds. You will also continue to hold ownership of the stocks unless you default on the loan. Stock loans are an amazing way to access quick funding, but because they are subject to the risks of a fluctuating market, lenders will often require high interest rates. 

If you are interested in exploring the opportunities that stock loans can provide for you and your family, you can contact a reputable lender who can assess your eligibility and calculate the loan amount you can receive.  


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