Marvelous Money: Preparing financially for a baby

9 February 2015

Well, here it is: the most frequently-requested topic since I started Marvelous Money. I have resisted writing on it since I have not, in fact, had a baby, and therefore feel under-qualified to write about what someone should do to prepare for having one, but the requests kept coming. So, after thinking about it for many months, I figured I would do this:

1. Put my best attempt forward, based on things John and I have thought about or I have discussed with the wise people around me.
2. Ask for your advice in the comments!! People who have had babies, I want to hear from you!
3. At some point in the future, after I have actually had a baby, come back and write a follow-up post. Hopefully I will not be crying tears of laughter at myself.

Alright, let’s do this! My best tips for preparing financially for a baby:

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1. Start saving. Just start saving money. It doesn’t matter if you don’t know what it’s for, or how much you need to save, or whether or not you’re pregnant. If you’re thinking about having a baby, start saving money. It’s always a good idea to save, but you will surely need it for something if you’re adding a new member to the family. Money is not everything, but generally, the more money you have, the more choices you have.
2. Start, build, or top-off your emergency fund. If you currently have no emergency fund and are pregnant, it’s unlikely that you’ll be able to set-aside three to six months of savings in nine months (it took us two years). That’s okay! But just because you can’t do it all doesn’t mean you should do nothing. At the very least, set aside $1,000 to deal with unexpected expenses.
3. Find out what your out-of-pocket maximum is and save that amount. I hear that it’s a little bit expensive to be pregnant and to actually birth a baby. Therefore, it’s entirely likely that you will not only hit your insurance deductible but reach your out-of-pocket maximum. If you have an HSA, your maximum could be thousands of dollars (ours is $4,500). Read up on your health insurance plan and be smart about what expenses you could be looking at.
4. Research your maternity leave. If you currently have a job and don’t know if you have maternity benefits or what they look like, now is the time to find out! How long is it? Do you get paid? Full salary, or partial? What does FMLA leave mean for you? If you won’t be getting paid, discuss with your spouse how you will make up the difference in your household budget – savings? Cutting back on expenses?
5. Try to make some of your income more passive. If you are an entrepreneur or a creative person, brainstorm ways to bring in more passive income during your maternity leave, if possible. This could look like an invitation download if you have an Etsy shop, or an e-book if you blog, or even working ahead (if you sell a product) to have items ready to ship. Not relevant for everyone, but I wanted to mention it!
6. Talk with your spouse about what you want your life to look like. And use that discussion to estimate how your costs might change. Are one of you planning to stay home? For one year? For ten years? How will you make up the difference in your budget? How will your budget absorb the additional expense of a child? Are you on the same page about where you’ll cut back, if necessary?
7. Research childcare options. If you’re planning to have any sort of childcare, what will it cost? Full time day care? Full time nanny? Part time? Grandparents? Request information or ask around and figure out how much each option costs in your area. Brainstorm how you will fit this money into your budget.
8. Make sure you have the important things in place. While not completely financial in nature, making sure you have a living will in place, life insurance coverage, and other important grown-up items becomes even more important when you bring a child into the picture.

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Adorable niece! (And adorable sisters, too.)

9. Think simple! Yes, there are mandatory expenses that come along with having a baby – but I think most of the time a lot more money is spent on a new baby than is actually necessary. John gets annoyed at me when I say things like this, because he thinks I’m being naive. Maybe I am, but in talking to friends and observing the world, I think there is a lot of truth in that statement.

My eyes were opened when talking to my friend M. Her daughter was born six weeks early. She had just had her shower the day before; she and her husband were planning to fill in the gaps in the next few weeks to make sure they were ready for baby’s arrival. Instead, they spent the next few weeks in the hospital and never went on that big purchasing trip – they just bought what they needed as they needed it, and most things they never ended up purchasing at all.

From what I hear, babies don’t need a whole lot. They certainly don’t need a fancy nursery. They don’t need a ton of outfits (probably a multi-pack of simple onesies would be fine to start). They don’t need a special blanket to lie down on or cover them in their stroller (you probably have an extra blanket in your house you could use). I’m not saying these things aren’t lovely or useful or that I might partake in them myself – but if you’re worried about the cost of a new baby, I want to encourage you that there are many ways to reduce expenses. Borrow or purchase items from older friends or siblings. Shop consignment sales and stores for clothing. Search Craiglist for used items at a fraction of the price.* I know I will be doing all of the above!

To conclude, there are a lot of big questions, and words like “saving” and “budget” and “thousands,” in this post. Yikes! Instead of being discouraging or overwhelming, I hope it leaves you feeling empowered. I worry sometimes that a future child will derail the financial momentum John and I have worked so hard to build, but I think being brave and thinking ahead is the best way to ensure we have as many options as possible when the time comes. I hope you feel the same way!

Friends, I would LOVE to hear from you!! If you have a child, what, if anything, did you do financially to prepare your family? Does this advice ring true or am I totally off? If you are thinking about having a child, what financial questions do you have?

*Safety standards are updated often, and I know there are certain items (cribs, car seats) that experts recommend buying new. Make sure to do your research!

15 Responses to “Marvelous Money: Preparing financially for a baby”

  1. Anne

    Don’t buy much clothes: you will recieve so. many. clothes as gifts it will make your head spin.

    Almost anyone you know with kids a few years old will offer you their cribs, car seats, strollers etc: not buying those will save an enormous amount of money. We bought new tires for the stroller (18 euros), and a cover for the car seat (8 euros), which is a steal compared to buying those items new at a shop. And with some elbow grease they look as good as new!

  2. Laura

    We’re expecting our first in June, so this is a timely post for me! I don’t have any advice to add yet, but I agree that there are a lot of “must-have” items out there that we won’t necessarily need. And a way we have decided to save some money is by using cloth diapers. The up-front cost can be expensive, but we’ll be able to save thousands over the next couple of years not to mention being able to use the diapers for future children.

  3. Kara

    I definitely recommend buying baby gear (swings, jumpers, exersaucer, etc.)through consignment sales! I got so much that way and babies use it for so little time that they are usually in great shape! I also recommend looking into a Dependent Care FSA from your employer. It allows you to put money in pre-tax to pay for daycare expenses.

  4. Amy

    cloth diapers!!! check http://www.diaperswappers.com/ for used diapers (it sounds gross, but cloth can be easily sanitized).

    also, if you plan on doing a baby gift registry, put things on there you absolutely need, but also things you might not buy if you had to pony up your own money to do it. that’s how we got our swing, which i never would’ve bought myself and, as it turns out, NONE of my children could stand it.

    start with the basics: onesies, pants, socks, hats, breastfeeding pillow (if necessary), and diapers. we didn’t even use a crib until our boys’ first birthdays because they just slept in the bed with us. babies really don’t need much at all.

  5. Rob

    Em, you’re brave to climb out there on that exposed limb. But it is a good idea to ask a lot of people, listen to it all, take your own counsel, then navigate your way through using common sense when the time comes.

  6. Megan

    Kudos to this post! This is WHY I got started with Arbonne! I just wanted a way to build cushion this for the future and have residual income when that time comes so I can sit back, still make money, and enjoy being a new mom….and then work whenever I’m ready to out of my home. I would be happy to show anyone how to do the same. I don’t want to worry about maternity leave or childcare or having to ‘go back to work’ in the traditional sense. Mainly because childcare is so expensive and I’m not willing to trade my time at a job all day that may barely cover those costs. After moving cross country twice in 3 years, our finances and my ‘career’ have overall taken a toll, but things are finally slowly coming back around. And no, not expecting any time soon, but slowly inching towards that direction. You never know what could happen, though, and Lord forbid the unexpected surprises. I had a friend who had premie twins and they made a joke later well after the fact that one was finally paid for! Those sweet things were in nicu for weeks. As new and joyful having a baby can be, I know from all my friends how hard and crazy things can get, too. I just can’t imagine adding additional money worries to the plate. And I’m with you! I don’t see how all that stuff is necessary! I also kind of cringe today at the thought of 4 types of baby saucers and hyper colored toys or legos everywhere!! But, that’s totally a different discussion!

  7. We had our baby girl in August and took many of the steps you mentioned in your blog post to prepare financially. #8 is super important. I’d also recommend not to buy anything until after your baby shower, so that you can evaluate, pool any gift cards, and really see what you need. Keep any receipts incase you need to return anything. I’d also recommend starting a 529 college savings plan as soon as your baby is born and set a goal for how much you’re going to set away per month/year. We gave the account information to our parents so that they can put gifts in for Christmas/birthdays, and are so thankful for their help.

  8. So incredibly timely! I’m expecting my first in early April and there’s so much to say about this topic! #7 (childcare) and #9 have been huge for us! Luckily I own my own business so I have the luxury of being more flexible than most. Also kudos for your #9! I recommend everyone watch the documentary Babies for more on this point. It’s super cute but my real takeaway was that babies don’t NEED lots of material things. It’s incredible how over-the-top and materialistic our culture is in terms of babies, compared to most.

    Some other money saving tips I’ve picked up along the way…

    I agree with Linnea on not purchasing too much prior to any baby showers. Resist the urge (it’s hard) to buy a lot of stuff early simply because it’s cute! Wait and see what others purchase before picking up anything yourself.

    We’re purchasing a Stokke stroller we love from eBay (as opposed to in the stores) to save tons.

    I found out that under the Affordable Care Act insurance companies are required to pay for breast pumps (which are expensive). Go here for more info http://www.breastpumps.aeroflowinc.com/qualify-through-insurance/

    And finally, where you give birth will determine costs, too! I’m giving birth at a birth center under the care of midwives (instead of at a hospital with doctors). While my decision to do this had nothing to do with money, in the end our birth will likely cost half that of a hospital birth.

  9. Oh you KNOW I loved this post!

    Yes yes and yes to all of the above. A few things/tips we did to prepare :

    – Get a life insurance plan in place on Mama BEFORE getting pregnant. Most Life Insurance companies will not approve a pregnant woman for life insurance. We got life insurance on me when I was fit and healthy, 8 months prior to ever getting pregnant. It’s a great way to love your family well and be prepared, no matter what.

    – If you’re a two-income household, start living on 1 income months before the baby arrives. We’ve done this for years, so it wasn’t a big change for us, but it makes the transition of maternity leave way less scary. Plus, it allows you to save a lot for upcoming unknown expenses!

    – Get a breast pump at the hospital through your insurance. This is advice we’ve heard from friends but haven’t actually done yet, so I’m sure it also depends on your insurance plan. But those things are expensive! So if I can save $300 (and my deductible is already met), I will!

    – Don’t fall into the crazy-baby-marketing, but simply decide on what’s important to you. I agree with your sentiment : babies are SIMPLE. They really don’t need a ton of stuff! The one expensive thing I want is a nice running stroller! I’m saving up for that just in case it’s not purchased for me. Other than that, I’m setting my sights on whatever comes my way at my baby shower, then buying only used and consignment baby gear after that!

    – Borrow a friend’s Mamaroo. :)

    – My philosophy is that keeping the gender a mystery will actually benefit you financially. I’ll let you know if that pans out to be true :). We are receiving lots of practical gifts that can be used again and again, rather than a bajillion pink tutus / blue onesies. People LOVE to buy gender specific things, but when they don’t know the gender, they usually lean more practical in their gift giving! Which translates to : less returns at Target, more needs met.

    Loved reading the other comments here, too!

  10. Danielle

    I agree with Nancy. Keeping the gender a surprise has been a wonderful blessing to our family. Today is actually our due date (!!!), and so far nearly every gift from family and friends has been thoughtful and practical because they can’t buy cute gender specific clothing! We know this will make a difference not only with this one, but future children as well. We have a solid base of practical items and used consignment sales to supplement.

    It’s also important to note that God’s timing is better than ours, and little baby blessings often happen before you’ve checked many of these items off this list. It’s great incentive whether you are thinking about, already pregnant or have a little one. I’ve loved how pregnancy has focused my husband and my life and financial goals.

  11. Em

    @Laura I love the idea of cloth diapers! Unfortunately, they’re not allowed at most day care centers, which is probably the route we will be going someday…

    @Kara John was kicking himself when you mentioned the FSA for forgetting to include it – a great resource for those who have it!

    @Linnea Yes! I didn’t want to scare anyone even more by mentioning college, but obviously super important to start thinking about :)

    @Nancy You are not the only one who has had that insight about going gender neutral saves money in the long term, and I think it’s spot on!

    @Danielle Early congratulations!! I loved what you said about pregnancy focusing you and your husband and your life and financial goals – so beautiful!

  12. Lauren

    This list and comments are so true and helpful! I don’t have a baby yet, but my tip would be go to yard sales! My mom yard sales every Saturday morning and has gotten the nicest stuff. I’ve even been to sales with her in million dollar neighborhoods. Often yard sales will advertise on Craigslist or in the paper and they will usually say if they have baby stuff in the details. You can buy baby clothes for a dime to a quarter a piece, and often get some toys still brand new! As well as furniture. It’s much cheaper than consignment stores, have a friend go with you and have fun!

  13. Another great money post! And I loved reading everyone’s comments! I truly was amazed at how much stuff we got and haven’t used or realized we really didn’t need. But Ialways keep receipts for everything and never open packages till I actually use an item so I was able to return a few things to get what we actually ended up needing, or just more diapers! ;)

  14. Loved reading this post, Em! So many goodies to keep in mind as we prepare for Baby Bosse :)