What to Expect When You’re Expecting

They say having kids changes everything. With your finances, this is certain – the average cost of raising a child from birth through age 18 is about $250,000.  Whether pregnancy catches you off-guard or is long anticipated, preparing for a baby is more than simply life insurance and wills. It’s a commitment to reorganizing your finances so funds are available to meet your increased expenditures.

First, prior to the arrival of your baby, you need to make sure your health insurance is in order, and that you have funds set aside for out-of-pocket expenses (this includes things not covered by insurance (e.g. birthing classes, car seat), your medical insurance deductible, and your co-insurance after your deductible is paid).  Without adequate health insurance, hospital costs for delivery could run up to $8,000; this figure rises significantly if it’s a high-risk pregnancy or there are complications.

Second, any financial planning you are currently doing requires an assumption that your monthly expenses will shoot up by about 10% when you have children.  While (sadly) your nights on the town and other personal expenses may decline with children, the costs of baby clothes, diapers, doctor’s visits, and the myriad of other expenses means that your monetary outflow will be significantly higher than when you were childless.

Third, it will be helpful to rethink work arrangements if you are part of a two-parent household.  Given work-related costs such as child care, commuting, taxes, and other expenses, it may not make financial sense for a lower-income partner to continue working.  This requires a rigorous examination of your financial needs and budget, and your Community Ladders advisor can sit down with you well in advance to discuss possible scenarios.