Career & Money
Financial Essentials For New Parents, Experts Checklist
When the two positive lines appeared on my pregnancy test, I was overjoyed to share the news with my husband that we were about to welcome a new baby. If you know me well, you can imagine that I quickly shifted into planning mode. I sought out all sorts of recommendations for my baby registry and meticulously compiled a list of essentials for my hospital bag. However, I must admit, there were some other lines that didn’t bring me joy, and those were the numerical ones glaring at me from my bank account. Suddenly, it felt like my financial reality was dominated by dollar signs. Bringing a baby into the world is thrilling, but it also prompts a critical reflection on how to prepare financially for this new chapter.
Though I wished I could ignore the notion of financial preparations for a baby and pretend that raising kids didn’t come with costs, the truth is that parenting today is incredibly expensive. In the United States, the financial responsibility of raising a child is estimated to average around $234,000. So, where do you begin, and what factors should you consider to ensure you’re financially ready for a baby? Finance expert Seema Sheth (@bobeema) recently shared a TikTok video that has gone viral, aimed at assisting expecting parents with this exact concern. Her video, featuring a straightforward financial checklist for new parents, has amassed over 117,000 views, over 10,000 likes, and has been saved more than 5,000 times.
The Viral Basic Baby Financial Checklist for New Parents
In the viral clip, Sheth—who was pregnant at the time—takes a leisurely stroll while discussing her topic. Fittingly, she opens the video by introducing herself as a finance expert and states, “I’m going to tell you about some things to think about as you prepare a plan to have your baby.” It feels like an intimate chat between friends who are exchanging mom-to-mom advice on how to navigate the financial obligations of being a new or seasoned parent. She then outlines the following essential points to consider before the baby arrives:
Check Your Insurance
Reach out to your health insurance provider to ascertain potential costs. Generally, your maximum out-of-pocket expense will give you a rough idea of what to expect. Sheth assures parents that if they don’t currently have that amount saved, they can “work out a payment plan with either your insurance company or hospital post-delivery.”
Create Your Post-Baby Budget
Consider new costs associated with your baby, such as diapers and other essentials. She emphasizes the importance of writing these out.
Know Your Childcare Costs
Be certain to calculate your childcare expenses. Sheth notes that these figures can fluctuate over time. Additionally, having an emergency fund can safeguard against unforeseen expenses.
Be Aware That Your Health Insurance Costs Will Increase
Keep in mind that you will be adding a new ‘dependent’ to your health insurance plan, which could affect your costs. Sheth remarks, “Costs are going to go up, especially if it’s your first dependent.” Be sure to incorporate this anticipated expense into your financial planning.
Sheth emphasizes the significance of the last two points, suggesting that while you can “wait until the first couple of months are over and you’ve like regained a sense of consciousness,” it’s wise to plan ahead as much as you can.
Have Estate Planning Documents in Place
Ensure that your estate planning documents are in order, which includes designating a guardian for your child. Along with this, having a will ensures that there’s a plan in place for your child’s care should something happen to you.
Buy Life Insurance
It is crucial to have life insurance. Sheth states, “If something happens to you, there is money to take care of your kiddo if you’re not here to do that yourself.”
Other Ways to Budget for a New Baby
So, we have confirmed that raising a child can be costly. However, various strategies may help alleviate the financial pressure depending on your employer and location.
Childcare
TikTok user @rebeeccastuart4 remarked, “Also daycare costs soooooo much more than you think.” Current statistics from the U.S. Department of Labor indicate that childcare expenses can range from approximately $5,000 to $15,000 annually per child. My initial thought was that such costs are akin to college tuition. Thankfully, you might be eligible for ‘The Child and Dependent Care Credit (CDCTC),’ a tax credit designed to assist parents and families with the expenses of caring for their children and other dependents while they work, search for employment, or pursue education. Additionally, inquire with your employer about whether they offer a ‘Dependent Care Flexible Spending Account (DCFSA),’ which is a pre-tax benefit account utilized to cover qualifying dependent care services.
Maternity and Paternity Leave
TikTok user @mommafitbit advised considering “the cost if not working during maternity/paternity leave, if you take unpaid time, or don’t have paid time.” The American Pregnancy Association suggests, “Check in with your human resources department to find out the details about your maternity leave options.” Your employer may provide a portion of your salary during this period.
Saving for College
Sheth further mentions, “There are also fun and exciting things you get to save for, you know, [like] a college education.” She recommends utilizing a 529 plan to save for college for her four children. Within the 529 plan, there are generally two types: education savings plans and prepaid tuition plans. Education savings plans are “tax-advantaged investment accounts” aimed at educational savings, while prepaid tuition plans “allow you to pay in advance for all or part of the costs of an in-state public college education.” Check your state’s specifics to determine eligibility for these plans.
If You Don’t Have Health Insurance
What if you lack health insurance? Your eligibility for government programs like Medicaid, Medicare, or the Children’s Health Insurance Program (CHIP) may depend on factors such as your income, age, and employment status.
Beginning in January 2022, the No Surprises Act mandates that your healthcare provider must offer a good faith estimate for estimated charges related to your care.
In the event that you or your partner cannot access insurance through your employer, or if there has been a recent job loss, platforms like HealthCare.gov permit you to explore insurance coverage options independently.
As Sheth says, “Having a kid is stressful enough.” Therefore, getting your financial matters organized can lessen the load. With this information, you should feel more empowered to kickstart your financial planning for your growing family. Personally, I can say a financial checklist for new parents like this would have been a valuable addition to my pregnancy resources. Now, it’s imperative that I find a way to incorporate this into my own preparation.
