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Finance for Parents

How to Prepare for a Baby: 5 Things to Get Ready for the First Year

By Jessica SillersFeb 11, 2020

Babies change more in their first year of life than at any other time. Your little one will triple her birth weight, learn to crawl or even walk, and say a first word or two.

It’s no wonder that your life goes through major changes, too! Becoming a parent means juggling multiple new financial goals—we’re here to help you find your way. After all, it takes a village.

As you think about how to prepare for a baby (and for all the challenges and joys of your baby’s first year of life), here’s what you need to know:

1. Rebalance Your Budget

One of the biggest new-baby “expenses,” according to Matt Becker, Certified Financial Planner and founder of Mom and Dad Money, isn’t technically an expense at all: If one parent plans to quit working and stay home, you’ll need to have a plan for your new single-income lifestyle.

The best way to prepare for a baby financially, if you can, is to start living off your new single-income budget before the baby arrives. This lets you adjust with some room for error, since you’re still bringing in both partners’ income, plus you can save the stay-at-home-partner’s paychecks to build a nest egg.

If you’re both working and paying for daycare, you’ve still got some budget calculations to do. Childcare can easily cost as much or more than housing, especially if this isn’t your first baby, according to a state-by-state guide.

So where does the money come from? You’ll probably scale back on some entertainment spending (you may want to spend nights in with the new baby, anyway), temporarily reduce retirement contributions or find a cheaper grocery store option.

You can also keep your budget in check by resisting the trap of proving you’re a good parent with a baby gear shopping spree. Your baby needs a car seat, safe sleeping space, milk, diapers and a few outfits. Nursery decor, a dresser, specialty baby carriers and many other items can wait at least a few months if money’s tight.

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2. How to Prepare for a Baby: The Finances of Parental Leave

Your top financial priorities will be meeting basic needs (food on the table, lights and heat on), paying at least the minimum on bills to protect your credit and purchasing health insurance for everyone in your family. Once those goals are met, you can work on saving for a rainy day.

If your employer doesn’t offer a paid parental leave policy, you may find yourself dipping into savings to cover costs while one or both parents are home.

Ideally, your emergency fund would be equipped to cover three to six months of living expenses. When planning for a baby financially, shoot for at least $1,000 to $2,000, and preferably more.

“Getting that savings in place will basically stabilize your financial situation, so whatever comes up with car repairs, home repairs, a medical bill, you should be able to handle that from savings without going into debt or making major changes in your daily life,” Becker says.

3. Insure Your Family’s Future

When planning for a baby, you might want to consider term life insurance. If something were to happen to you or your spouse, a life insurance policy could help provide a financial cushion—replacing the income you would’ve contributed to the family, and also covering things like funeral costs, debt repayments and more.

We’re sure you’ll have a healthy pregnancy and birth, but on the off chance that something were to happen at the hospital, life insurance could help make sure that your spouse and baby would be all right financially. Here’s more on how life insurance works and how the life insurance process works when you're pregnant.

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4. Retirement or College?

Paying for childcare, diapers, formula, additional insurance policies, debt payments and emergency savings is already enough to stretch a budget! If you don’t have enough left to fund both your 401(k) and your baby’s 529 plan for college, how do you choose?

Family financial planning sometimes involves putting your own mask on first, Becker recommends. Just like in an airplane emergency, you need to protect yourself in order to care for your child.

“A lot of times, parents feel selfish saving for prioritizing retirement over saving for college, but it’s not a selfish goal at all,” he says. “You have to make sure your own financial situation is secure before helping your child, because if you put all your money into college and don’t save for you, the future burden will fall on them.”

(Is there such a thing as saving too early for college?)

There are lots of ways to pay for college, including scholarships, grants and loans or choosing a school with lower tuition. Your retirement plan, on the other hand, depends on money you save, so it comes first.

5. Watch Your Baby Grow

Many new parents need a reminder to keep an eye on their finances, but no one needs to tell you twice to relish quality time with your baby! Babies go through remarkable changes in their first year. A tiny taste of what’s to come this year:

  • Skills: Head turning, reaching, grasping, scooting, crawling, sitting, standing and walking(!) takes your baby on a journey from tummy time to toddling.

  • Mealtime: For four to six months, all baby needs is milk, whether from mom or a bottle. As the months progress, you can introduce your little one to mashed fruits and veggies and discover new favorite foods together. (Get used to Cheerios in your backseat!)

  • Communication: At first, this means tons of crying, but then babbles, coos and giggles. Will Mama or Dada get the first-word honor? Only time will tell.

  • Playtime: At first, your face is the best toy, with its ability to express love and emotion. Bubbles, balls, pots and pans and your cell phone are strong candidates for favorite toy as the year goes on.

Take tons of pictures, and enjoy bonding as a new family together. Whether this is your first or fifth baby, a new life is always amazing to witness.

Want to find out what comes next? What you need to know when you have a 1-year-old. You can also check out what you need to know for the first ten years of your child's life.

Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

What should you be doing to help protect your family? Get your financial checklist now.

This material is designed to provide general information on the subjects covered. It is not, however, intended to provide specific financial advice or to serve as the basis for any decisions. Fabric Insurance Agency, LLC offers a mobile experience for people on-the-go who want a easy and fast way to purchase life insurance.

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Written by

Jessica Sillers

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