Organize Your Family’s Finances Before Having a Baby – A Nine-Month Plan

As you excitedly await the arrival of your bundle of joy, it’s important to organize your family’s finances before having a baby, ensuring a safe and nurturing atmosphere for your newest addition. By establishing financial stability through these comprehensive steps, you’ll gain peace of mind, allowing you to wholly enjoy the unforgettable moments with your expanding family.

If you are a soon-to-be parent, you have likely mastered enough medical vocabulary to pass for a young OB-GYN, with knowledge of alpha-fetoprotein levels and epidural anesthesia. Studies indicate, however, that you should pay equal attention to the vocabulary of financial well-being, such as obscure terminology such as “section 529 tax-advantaged college savings” and “spouse IRAs.”

The U.S. Department of Agriculture (USDA) said in 2017 that a middle-class American married couple spends about $17,500 a year, or $296,684, to raise a child from birth to 18. In addition, college tuition costs an average of $54,880 per year at private institutions and $26,880 per year at in-state public schools.

The majority will have difficulty covering these expenses. According to the Federal Reserve’s 2016 Consumer Finance Survey, nearly two-thirds of households with young children do not save any money for college or other child-related expenses.

Ruth Hayden, a St. Paul, Minnesota-based financial adviser, explains that a baby’s zero-digit savings begin to collide with the rising expense of childrearing during the sixth Month. “Just when the baby is becoming so adorable and likable, a couple begins to argue about money,” she stated.

With a combined 26 children and 18 grandchildren, she and a team of other financial professionals assisted us in developing a nine-month plan for expanding your nest funds as your pregnancy progresses. What about the payback? According to research, persons who commit to a financial plan save twice as much as those who do not.

The warm and fuzzy benefit is that the more financial decisions you make in advance, the more time and energy you will have to enjoy your new kid.

1st Month

The sooner you begin organizing your finances, the better. Hence, whenever two lines appear on a pregnancy test, it is a fantastic moment to begin arranging how to pay for the impending childrearing expenses.

Pay off your credit card debt.

According to Jean Chatzky, financial editor of NBC Today, the first trimester is the time to tidy up your finances. A decent starting point is credit cards. Balances in the thousands of dollars incur hundreds of dollars in annual interest, which you will require for fresh expenditures. They also hinder your expanding family’s ability to obtain loans for expensive products such as a house or a vehicle.

Try shifting your credit card balance to one with a lower interest rate. Visit Bankrate to compare rates and fees; after switching, charge as little as possible until the loan is paid off.

Monitor your spending.

Next, you must develop a fresh budget. From there, record all of your family’s expenses (large and small) to gain a better understanding of your monthly expenditures. You can store receipts and make notes in a spreadsheet or on your phone. When it’s time to crunch the figures (in the third Month), this meticulous tracking will help you discover your family’s spending patterns so that you may pinpoint areas where you may need to cut back when the baby arrives.

2nd Month

Continue recording your expenses during your second month of pregnancy. Moreover, ensure that your beneficiaries are current.

Revisit your beneficiary list.

Delete any out-of-date beneficiaries from your company-sponsored life insurance and 401(k) plan, especially if you started your career as a single individual. Dee Lee, a certified financial advisor with Harvard Financial Educators, recommends reviewing beneficiary designations whenever there is a significant lifestyle change. Your parents, siblings, or prior partner may still be listed instead of your child.

3rd Month

This Month, you should review your credit score and construct a formal budget using the expenditure data you’ve been gathering.

Verify your credit report.

Even if you pay your payments on time every month, discrepancies in your credit report can occur. Save time and stress by rectifying errors now, while your life is relatively calm. When you’re expecting a child and planning to make significant expenditures like a home or a car in the near future, having a good credit score is critical. A high credit score might assist in securing the lowest interest rate on a vehicle loan or mortgage.

Equifax, Experian, or Transunion can provide you with your credit report. A basic report may not cost more than $12, as legislation stipulates. Identity theft might result from requesting a free credit check from less trustworthy companies. In addition, limit yourself to one check per year; more than that can negatively impact your credit score.

Calculate the numbers.

It is time to complete the final budgeting stage. If you haven’t already, enter all of the data from the spending, you’ve recorded over the past few months into a spreadsheet or budget monitoring tool. This will offer you a complete view of your present spending before you modify them to accommodate a child.

Consumer Federation of America (CFA) Executive director Stephen Brobeck, a Washington D.C.-based advocacy and education organization, states that your objective should not be to break even, but rather to save money regularly. One-fifth of employed Americans, according to a 2019 Bankrate survey, do not save for retirement, an emergency fund, or other long-term financial goals.

When constructing your new budget, you should consider your future childrearing expenses. The average middle-income household can expect to spend roughly $1,056 per Month to supply an infant with essentials such as food, clothes, shelter, transportation, and child care, according to a 2015 USDA report (the most recent data available). If you take an extended vacation from work (or transition to part-time hours), you will be faced with the double-whammy of having to fund these new expenses on a reduced income.

Couples who are unable to save the required 10% of their income may desire to consult with a certified financial planner, a specialist authorized to assist clients in developing financial goals. On its website, the Financial Planning Association explains certification and costs. The CFA provides free consultations and other budgeting advice with its America Saves initiative.

4th Month

It is time to choose how you will pay for your newborn’s expenditures and, if relevant, how much time you will take off from work.

Establish a connection in HR.

Obtain a complete briefing on maternity and paternity benefits from the human resources department. The Family and Medical Leave Act provides up to 12 weeks of unpaid, seniority-protected leave for new parents working for a company with at least 50 employees. The Family and Medical Leave Act requires you to provide at least 30 days’ notice when requesting time off.

Your employer must pay the standard portion of your health benefits for the duration of your employment. In addition to any paid leave, federal law entitles birth moms to short-term disability pay (usually six to eight weeks) if their employer normally provides disability benefits in other circumstances.

Employ austerity.

You made a new budget last Month but might be tempted to put it on hold until the baby arrives. It would probably be an error.

“During the second trimester, you must ensure that you are saving something,” adds Chatzky. Start by setting aside funds to offset the income loss you anticipate during any unpaid maternity leave. “Determine the void and then attempt to close it beforehand,” she advises.

If you intend to furnish a nursery from scratch or buy expensive baby gear, set aside more funds for this purpose. Invest the money you will shortly spend on the baby in short-term certificates of deposit or money market accounts. If you begin now, you could amass a sizeable sum by the due date.

5th Month

As you approach and past the midpoint of your pregnancy, it is prudent to begin thinking about daycare choices and how you will pay for them.

Make the daycare rounds.

Before your energy wanes and mobility becomes more difficult, the second trimester is ideal for examining daycare choices. Child Care Aware provides a free service that connects you to a local resource and referral organization. These non-profit organizations closely monitor the types of childcare offered in their region, such as center-based and family care, as well as the costs charged by local providers.

Check nannies’ references to maximize your return on investment. Check that daycare administrators hold degrees in early childhood education, that staff members undergo training in child development, and that caregivers are not seasonal.

6th Month

This is the moment to address details such as life insurance and a will.

Purchase life insurance.

James H. Hunt, a retired CFA actuary specializing in life insurance, recommends that the majority of expectant parents insure themselves for six to eight times their gross annual payment to cover the anticipated dependent. Cash-value policies, including whole life, variable life, and universal life, are often difficult to understand and offer poor value, especially when you may earn interest through tax-deferred and tax-free assets, such as retirement accounts and college savings programs.

Instead, Hunt recommends that parents purchase term life insurance, preferably for 20 years or fewer. A 30-year-old woman in good health can purchase a $750,000 policy for approximately $300 per year. Visit to compare insurance rates.

Draft a will.

Despite your hesitation to choose who will raise your child and manage their finances if both parents die, preparing a will and choosing a guardian before the baby is born is easier. Hence, when the baby arrives, you can focus exclusively on the child, not drafting a will. On average, you may expect to pay between $500 and $1,000 to have a lawyer create your will.

7th Month

Consider establishing a college fund for your child.

Perform the Upromise preliminary exams.

Enough with the pessimism! Upromise, a popular college savings service with over 3 million subscribers, lets you kick-start your education fund when you buy groceries, and petrol and eat out at restaurants. Most of all, there is no requirement to identify a beneficiary to open an account, so expectant parents can begin saving for their child’s education before deciding on a name.

Register your credit cards at to signup for the free service. After that, a part of your charges (up to 5% at some merchants and 10% at certain eateries) are automatically transferred to your child’s account.

Remember the numbers 5-2-9.

If your new budget allows for college savings, tax-advantaged 529 investment programs are unmissable, as they allow you to accumulate $300,000 to $500,000 per child tax-free (depending on the state). All 50 states provide a plan, and you may currently choose from over 67 investing strategies, but you’ll have more time to evaluate them now than later, according to Joseph F. Hurley, CEO of and author of The Best Way to Save for College.

You can even register an account now; most plans will offer you up to six months after the child’s birth to add a social security number. If you would rather that family and friends donate to your child’s education fund instead of giving you gifts, have them deposit their contributions directly into the 529 accounts.

8th Month

Consider the generosity of your friends.

Some of your mother’s friends are probably crocheting yellow blankets in preparation for your child’s birth. Your friends are coordinating showers behind your back. People are typically incredibly giving when a child is born, so you may want to wait to purchase anything but the most essential baby items until you see what you receive as gifts.

Also, you should open a safe-deposit box at your bank. Some folks may send savings bonds to commemorate the birth of your child. You should preserve these plus the birth certificate in a secure location. Bonds of the common Series EE and the inflation-protected Series I can be cashed in tax-free to cover educational expenditures.

But, this rule only applies if the bonds are in your name and not your child’s. When placing the goods in the vault, record the important information about your bonds (series, denomination, issue date, and serial number). Treasury Direct allows you to monitor the earnings then online.

Keep your eye on retirement.

With nursery walls to paint and breathing techniques to perform, the third trimester may not be the most obvious time to save for retirement, but it is nonetheless a crucial objective to consider. Hayden recommends parents who plan to stop working, even for a few months, commit to continuing their retirement savings budget.

Parents who are absent for at least a year can contribute to a special retirement plan known as a spouse IRA. Even if the spouse contributes to a 401(k) at work, the IRS permits a nonworking spouse to save aside up to $3,000 annually and deduct the amount from the family’s taxable income.

9th and Beyond

As the due date approaches, continue to adhere to your budget and save as much as possible. You will also need to secure insurance coverage for your child.

Get insurance for your child.

Most health insurance providers permit new parents to add their newborn to their policy 30 days after delivery. Verify with your carrier or the human resources department. In any event, it makes logical to begin filling out the enrollment form with the baby’s name, and birth date left blank. As soon as you and your baby get home from the hospital, delegate to your partner or another support person the duty of adding these facts and submitting the paperwork to HR.

If you’ve followed our calendar, the final Month of your pregnancy should be spent relaxing, both financially and physically. Relax, brew a cup of tea, and give yourself a pat on the back for preparing your family’s finances for the arrival of your child.

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