Fortune Watch

I hear you are planning to have a baby…

If you considered only the financial implications of having children, you might end up childless. There’s no two ways about it: having a child is very expensive. Financial experts say a home is the biggest investment most people will ever make, but they’re forgetting about the cost of raising children, which far exceeds the average home price in many parts of the world.

Fortunately, most people don’t base this important decision on financial issues alone, but as with any other decision that will impact your financial situation, it’s smart to go into it with your eyes wide open and to be prepared. The changes that accompany adding a new little member to your family can be stressful, but you can reduce the stress greatly by minimizing the financial factor.

First, have you considered how you’ll manage on the reduced income caused by time off for the pregnancy and birth? Check with your employer to see if you’re covered by short-term disability insurance, which covers pregnancy.

In planning your personal finances for the baby’s arrival, there are several issues you need to consider. It’s time to get out a pen and paper and work out a budget that you can use once you’ve brought the baby home. Remember, these figures are in addition to your regular weekly and monthly bills.

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Even if you don’t have disability insurance, your employer may be required to grant you time off, but they’re not required to pay you during that time. Whether you’ll receive salary or disability benefits or not, schedule out your expected income and expenses and make sure you can make ends meet.

Another important area for your post-birth budgeting is health care. How much will your health insurance premium increase by adding the baby? Make sure you discuss this with your employer to find out what the family rate is, and specifically, how much more will be taken from your paycheck every week.

Probably the biggest expense you’ll incur once the baby is born (excluding a college education) is for child care, which is especially expensive for infants. Even when your child is old enough to go to school, you’ll have after-school care, summer camps, and other related expenses. Check out day-care providers well in advance of the birth of your child in order to find one that you feel comfortable with and that you can afford. If you want to be able to deduct your child-care expenses from your taxable income, you’ll have to choose a licensed provider because you have to report his or her social security number to the IRS when claiming the deduction.

As soon as you start thinking about having a baby, start a baby fund. Put a set amount into the account each pay period to cover unexpected expenses (there definitely WILL be some and I guarantee they will be far more than you ever dreamed of).
Bargain hunt for baby equipment and supplies. It’s important to buy the best car seat, stroller, etc., to ensure your child’s safety, but your baby will quickly outgrow many of the other items you’ll buy, and paying full price is often a waste of money. Talk to friends, check stores that sell used goods, visit yard sales, etc. Your baby will never know the difference.

The good news is Having a baby forces certain changes onto the parents, typically resulting in a less expensive lifestyle. You don’t go out as often for dinner or to a movie. If you think about it, people who don’t have children waste a lot of money filling time and avoiding boredom. Rest assured: you’ll have no problem finding something to do once the baby arrives.

To help you get a grip on the changes in your finances with the addition of a child, you’ll need a budget. Once you’ve evaluated the costs and have come up with a plan to cover them, you can sit back and enjoy the new addition to your family.