Starting a Family

Having a child will undoubtedly require some financial adjustments. Whether you plan to become a single-income family or send your baby to daycare, practice adjusting your budget for these changes. This exercise will help you reduce spending in other areas ahead of time. The money set aside could even fund some of the pre-baby expenses that come up, like:

• Maternity clothing
• Furnishing a nursery
• Non-medical prenatal services like prenatal workouts or massage
• Going on a “babymoon”
• Home improvements (like putting in a shed to make way for all your new baby gear!)
• Putting a down payment on a family vehicle

Another consideration will be the change in health insurance premiums. Hospitals and providers can vary widely in price, so you’ll want to do your homework; if your insurance offers a concierge or coordinator service, this is the perfect time to use it. Compare your and your partner's work-sponsored plans to see which would be a better fit to add your baby. No matter which you choose, this will likely be an increase in monthly cost. If you are in a qualifying high-deductible health plan, a health savings account could be an option to provide tax savings on your growing family’s healthcare costs.

The cost of child care is one area to consider carefully as you plan for a baby. Looking strictly at new expenses vs. lost income, having one parent stay home may seem like a no-brainer. However, there are some tools you can use to reduce the impact of daycare costs without sacrificing career growth. Ultimately, it comes down to preference — but don’t ignore the tools available to help working parents with the cost of dependent care. For example, you may be able to take advantage of the child and dependent care tax credit if your daycare provider qualifies, or your employer may offer a dependent care flexible spending account. If both are an option, a comparison of benefits will tell which makes sense for you.

There's no doubt you have hopes and dreams for your new family member, and it's never too early to start setting aside money to help fund those dreams. Just as your other family-based plans are multi-layered, saving for your child’s future should be, too. Whether it's a college fund or a special trip you hope to take with your child to celebrate a milestone, there are goal-based savings tools to help you get there. Short-term and long-term savings accounts can serve as springboards to investing for other big goals, and it’s never too early to start planning for college with a 529 college savings plan. 

If you haven’t already, you’re likely going to spend a lot of time reviewing your life insurance and working with your advisor to plan or update your estate in order to protect your growing family from the unknown. While documents such as your will, various trusts, and a power of attorney are essential, consider adding a “road map” to your estate plan to make the process smoother for your family and provide a guide for future changes.