Among all of life’s momentous occasions, having a baby is about as big as it gets. Given the sheer magnitude of the occasion and all the new responsibilities it entails, it’s no wonder many expectant and new parents wear anxious looks on their faces.

“Plain and simple, it costs a lot to have a baby,” says FPA member Elizabeth McFadden Aldinger, CFP®, of Legacy Wealth Management in Memphis, Tenn.

Expectant couples can put their nervous energy to good use by taking steps to control their growing family’s financial future. Here are some of the simple things that financial planners recommend they do as their baby’s due date approaches:

  • Set up an emergency fund with enough cash to cover three to six months of gross living expenses. Interest-bearing savings accounts and money market accounts are good options for housing the money.
  • Establish a savings account (separate from the emergency fund) for depositing baby-related monetary gifts and perhaps to house funds to cover the cost of baby gear. “You’re probably looking at spending at least $1,000 for gear, particularly if it’s your first child,” says Aldinger, “and you shouldn’t put all that on a credit card.”
  • Brace for birth-related healthcare expenses. Learn from your healthcare insurer exactly what’s covered by your plan and how much you can expect to pay out-of-pocket, then set aside funds accordingly. 
  • Assess your income situation going forward. Is it financially feasible for one spouse to cut back to part-time or take extended time off to care for the baby?
  • Get insured. Life, disability and health insurance are all critical to a growing family. Discuss your options with a financial planner.
  • Plan for all possibilities by putting in place (with an attorney’s help) a will, durable power of attorney and advanced medical directives, plus specifications for the guardianship of your children and the handling of your assets should you both pass away. 
  • Establish — and start funding — a tax-friendly 529 college savings plan or Coverdell Educational Savings Account, but “make sure you’re also doing what you need to do for your own retirement,” says Aldinger.
  • Ask an accountant about the tax ramifications — positive and negative — of having a child.

The arrival of a baby can drastically alter a couple’s financial picture. Enlist a financial planner to help make sense of that changing picture.


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