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Family Financial Planning For First Child

The Financial Birth Plan: When You’re Expecting Guide to Nurturing Family Finances for Your First Child

by Philip Tull | April 18, 2024 | Financial Planning

Welcome to the wonderful world of parenthood! Whether you are beginning to think about growing your family or eagerly anticipating the arrival of your little one, it’s natural to feel a mix of excitement and nervousness, especially when it comes to managing your family’s financial planning. Rest assured, with a little planning and a lot of love, you can navigate this new chapter with confidence.

As I eagerly count down the weeks until our family grows by one, I, too, am a mixed bag of emotions. The best piece of advice I could give — that I regularly give myself — is to embrace the addition as a new adventure full of thrills, wonder, and surprise around every corner. A mentor recently shared with me how he and his wife turned every late-night feeding into an enjoyable moment for the two of them — bopping to their favorite music, reading a book together, or just chatting over music and tea as they fed and put their baby back to bed. They turned what most dread into a desired moment. Goals I hope to attain.

One of the emotions or topics that have undoubtedly surfaced during baby planning is financial planning for baby. Can you afford a baby? What are the medical or health insurance costs? And so many more!

How Much Finance Do You Need for Baby’s First Year?

First Year Baby Costs Calculator

A few numbers to give you sticker shock:

  • Peterson-KFF Health System Tracker study notes that the average cost of pregnancy, childbirth, and post-partum care is roughly $18,865.
  • According to the U.S. Department of Agriculture yearly child costs can be between $9,300 and $23,380 on average (latest data available is from 2015). Don’t get me started on the estimated $900+ on disposable diapers!
  • U.S. Treasury Department’s data provides the annual cost for childcare averages around $10,000 per child for infants to four years old.

Let’s acknowledge these numbers can vary depending on income, health benefits, and family lifestyle. If you are at all familiar with a birth plan, let’s unpack six things how to financially prepare for a baby birth plan.

6-Step Guide to Help Nurture Your Family Finances for Your First Child

  1. Health Insurance

Before your little one arrives, review your health insurance to understand your coverage for prenatal care and delivery. Consider setting up a Health Savings Account (HSA) to help cover medical expenses at a pre-tax advantage.

  • What’s your plan deductible and will you hit it during your pregnancy? Does your plan follow a calendar year? Should you change plans before pregnancy for a lower deductible?
  • Once you know the out-of-pocket amount needed, you can utilize a HSA to set aside funds from each paycheck pre-tax.

  1. Life Insurance

Consider purchasing life insurance to protect your family’s financial future upon unexpected loss. Look for a policy that provides enough coverage to replace you and your spouse’s income / family contribution (stay-at-home parents provide family contribution such as daycare and household costs that should be valued similar to income) and cover future expenses like college tuition until your child is no longer a dependent.

  • How much for each of you is needed per year to care for the family upon loss?
  • How many years of term do you need (until graduation at high school or college)?

  1. Home and Nursery

Creating a nursery for your little one is an exciting and heartwarming experience, but it’s important to approach it with a budget-conscious mindset. Start by setting a realistic budget based on what you can afford, taking into account essentials like a crib, changing table, and storage solutions. Consider shopping for gently used items or repurposing furniture to save money. We were blessed to have friends and family give us hand-me-downs. DIY projects can also add a personal touch without breaking the bank. Focus on essentials first, like a comfortable chair for feeding and a safe sleeping space, then gradually add decorative elements as your budget allows. Remember, it’s the love and care you put into creating a nurturing environment that truly makes a house a home for your growing family.

  1. Daycare

Some of the highest costs you will experience are daycare costs. Some couples evaluate the cost-benefit analysis of one parent staying home for the first few years until elementary school. If you both are working and know you will need daycare, start shopping for options available in your area. Some things to consider:

  • How many days a week will you need care?
  • Does your work provide care or supplement the cost of care?
  • Can you join up with family and neighbors? Does your church provide a daycare option?

  1. Time Off: Parental Leave

Parental leave can vary drastically depending on your line of work and size of company. Be sure to take the time to understand the benefits available to you and have clear communication with your employer of expectations postpartum.

  • Store up time off.
  • Is part-time or hybrid remote work available?

  1. Nutrition

Not everyone has the luxury of choice when it comes to your baby’s nutrition, but if you do, consider the financial implications. Formula costs can stack up fast. Your local hospital may provide a milk bank or be able to connect you to your local La Leche League. When it comes to baby food, consider making your own! It’s not as hard as you may think: homemade baby food

Bonus: Future 4!

  1. Plan for Their Future: 

    Start saving for your child’s future early by opening a college savings account, such as a 529 plan. Even small contributions now can grow into a significant sum by the time they’re ready for college.

  2. Seek Support and Guidance:

    Parenthood is a journey best traveled with others. Seek support from fellow parents and consider consulting with a financial advisor to help navigate the financial aspects of raising a child.

  3. Teach Financial Values:

    As your child grows, teach him/her the value of money and the importance of saving and budgeting. Lead by example and involve your child in age-appropriate financial planning discussions.

  4. Celebrate:

    Finally, celebrate every milestone, big or small, along the way. Whether it’s your child’s first step or reaching a savings goal, take the time to cherish these moments and reflect on your family’s life adventure!

Remember, there’s no one-size-fits-all approach to family finances. Keep it simple and find what works best for your family to enjoy the adventure of parenthood. With a little planning and a lot of love, you’ll create a strong financial foundation for your growing family. If you are interested in scheduling a family planning meeting to discuss your financial plan, please give Tull Financial Group a call at (757) 436-1122 to speak with financial advisor.