There are so many things to consider when you are trying to financially prepare for a baby. Having a baby changes almost everything in your life and finances is no exception. To make this amazing journey of having a child easier, you need to have a financial plan that will support your family.
There are 3 different stages to financially prepare for a baby:
Stage 1: Before conception
Stage 2: Pregnancy stage
Stage 3: After the baby arrives
Budgeting is the one consistent thing you need across all three stages. At every stage, you will need to revise your budget to reflect the current stage. Let’s discuss these 3 stages:
Disclaimer: I am not a financial planner or expert. All information in the post is my opinion and should not be used as financial advice. This is based solely on my experiences. Any action you take based on the recommendations from this blog is at your discretion.
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Stage ONE: Financial planning before the baby is conceived
The best time to financially prepare for a baby is when you and your partner decide to have a baby. Here are 7 tips for this stage:
1. Budget and other financial goals
Come up with your financial goals and create a budget. An important step during this stage is to reduce your debt as much as possible. It is so much easier to work hard now to bring in the income to pay off your existing debt (or upcoming debt – like house debt). You have the time and energy to work on bringing in more income and to get into the habit of using a budget.
2. Assess your current living situation
Is your current home appropriate to accommodate a baby? Is it located in the neighbourhood where you want your child to grow up in? Perhaps you decide that you need to move. If you plan to buy a home, crunch those numbers to see how much you need to save for a down payment if you are able to afford those mortgage payments and to account for other home expenses (insurance, utilities, property tax, etc). Perhaps your current home is workable and may need some renovations and purging to make room for all the baby things.
3. Do you need to buy a new car?
Is your car big enough to hold a stroller? Can you safely secure a car seat? Just something to keep in mind as a new car is another big expense to budget for.
4. Building up a healthy emergency fund
With a new addition to your family, you should increase the amount in your emergency fund. Or if you don’t have one, this is the time to start building it. Kids may bring up many unforeseen expenses. An emergency fund will help protect your family.
5. Baby fund
Start saving up money for those future baby items. Strollers can easily range between $500-1000!
6. Understanding your finances with your partner
Sit down with your partner and review your finances to ensure both of you are on the same page. Agree on money goals for both the short and long term and keep on communicating with your partner regarding money.
7. Vacations
This would be the ideal time to go on those great vacations before having a baby. Remember to budget for these holidays!
Stage TWO: Financial planning – when you are pregnant
If you haven’t had any time to execute the financial planning tips during stage one as above – don’t worry, there is time! Review stage one and then move on to stage two.
BENEFITS: Ensure that you will have health and drug benefits lined up when the baby comes. Start planning for changes or applying for life insurance. Plan for a will for you and your partner (to be done after the baby arrives). Check to see if you qualify for EI – employment insurance during the maternity leave.
BUDGET: Once a baby is on the way, it’s time to modify your budget as you know your finances will be changing in 9 months. You are expecting less income and more expenses. Consider living the maternity budget now so your family will adjust to the lower income sooner. Manage a lower family income by cutting expenses: cancelling subscriptions and memberships, eating out less, and staying on top of your grocery budget.
BABY ITEMS: Create a budget for the baby items. There are so many different baby things out on the market, but you sure won’t need it all! Research and come up with a list of baby things you will need.
Here are 7 tips to stay on budget for baby items:
1. Baby Registry
Create a baby registry for friends and family. This will help tailor what you actually want and need. As you may graciously accept gifts, you don’t want to end with unneeded or duplicate items that you have to deal with afterwards. Consider requesting cash or gift cards.
2. Baby clothes
Understand that babies grow super fast! Don’t overbuy clothes as they will grow out of it quickly. Hand me downs from friends and family are helpful.
3. Second-hand items
Check out Facebook Marketplace, Kijiji and consignment stores for baby items
4. Carseat and stroller
Carseats and strollers are some of the more expensive purchases you will make. When shopping for them choose the furthest expiry date you can find. If you plan to have more than one baby, consider buying a stroller that can accommodate another baby (like a double stroller). In addition, make sure the car seat and stroller you choose fit inside your vehicle.
5. Disposable diapers
Diapers is an item that will be a continual expense until the baby is potty trained. You may be buying diapers up to 3-4 years! Be on the lookout for sales at the stores and online. Figure out how much each diaper cost (cost per unit) and then you can compare sales that way. You can even buy diapers delivered from Amazon!
Both Pampers and Huggies offer reward programs that give you the option to manage it both on app and your desktop. You collect points from each purchase and then claim reward items when you have accumulated enough points. Rewards include coupons that you can use towards future purchases.
6. Cloth diapers
Cloth diapers will save money and help the environment. It’s a great option when you plan to have more than one baby and can use it for future kids.
7. Breastfeeding
There are so many benefits to breastfeeding and saving money is one great reason! Baby formula is expensive and takes time to prepare.
Stage THREE: Financial planning – when the baby is here
You’ve been planning for stage three for a while now! Here are a few more things to financially prepare for a baby:
Budgeting
It’s time to put that baby budget in motion! Remember that budgets are adaptable and so modify it as you go along. Here are 7 parts of a family budget to plan for:
1. Food budget
Re-visit your food budget. Groceries can be one of the largest recurring monthly expenses. It is one good area to tackle if you are trying to make your budget balance. Meal planning is a must-know tactic to save both time and money for families. Have the working partner bring lunch to work daily.
Once your baby is able to consume solids, it is much cheaper to make your own baby food. Super Easy Baby Food Cookbook and 201 Organic Baby Purees are recipe books to make baby food.
2. Emergency Fund
Continue to build up your emergency fund if you haven’t reached your goal yet. This fund is important to protect your family from unforeseen circumstances.
3. Education Fund
An education fund will be a new category for your budget. You can break it down to 2 different funds: one for school fees when your child starts elementary (school fees, bussing fees, supplies, clothes etc) and the second fund is for when they reach post-secondary. Post-secondary school is a long time away, but you can take advantage of the government programs (RESP/529 Plan) now to help you save money for your kid’s education. It is scary to think about how much money may be required for college and thus it is smart to start saving now.
Consider putting money the baby receives as gifts towards this education fund.
4. Kid’s activity fund
You will want to add this category to your budget as well. This kid’s activity fund holds money for future birthday parties, extracurricular activities, music lessons, summer camps and sports. As kids get older, you will most likely need a larger budget for this fund.
5. Vacation fund
This fund will need to be expanded to accommodate travelling as a larger family. Expenses include airfare, more food, larger accommodations etc. It is ideal to be able to have the money to pay for your trip before you even go.
6. Going back to work
You may eventually have to go back to work and thus your budget will require to be changed again. For working parents, you will need to factor in childcare costs into your budget.
Here are 12 Childcare Options to consider when looking for the working parents.
7. Increase your income
Come up with ideas on how you can bring in more income with your job (asking for a raise, working more hours, do contract work). Have a side hustle.
Documents and benefits
Once your baby has arrived, it is time to make sure you have the appropriate documents and benefits in standing order. Apply for EI (employment insurance). Update your life insurance, will and beneficiaries. Apply for SIN/SSN, passport, and the Canada Child Benefit (CCB) for Canadian babies. Add your baby to your health benefits.
Birth control plan
It would be challenging to become pregnant again when you are not ready physically, emotionally and financially! Make sure you have a birth control plan in place. Remember that breastfeeding is not a form of birth control.
Cheap things to do when on maternity leave
Get a library card! Check out your local library for mom and baby programs, audiobooks, and books for yourself and baby.
Download podcasts and audiobooks that you can listen to when you have some downtime or you can listen to them when you are nursing.
A monthly membership at the gym adds up over time and you most likely won’t have time to leave the home to go workout. Invest in a simple work out gym at home. Working out at home will save time from having to travel outside the home and you can do it when you find those pockets of free time.
Explore the parks and playgrounds in your neighborhood. Arrange playdates with other moms.
Go for walks with your baby or with other moms and their babies.
Having a family is wonderful life journey and being financially prepared for a baby makes this journey easier. Financial planning occurs over 3 stages from the time of when you are thinking of having a baby, to the stage of being pregnant and then when your baby is here. Financial planning is an essential continual process to keep your growing family safe and to be able to enjoy life to its fullest.
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Great post! I’m sure a lot of people don’t even think about having to buy a new car. Having a baby truly changes your whole life. Love that you are helping parents make the transition a little smoother.