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Financial Goals

How a Baby Changed Our (Financial) Lives

Having a baby is a big deal. No, let me clarify, having a baby is THE big deal. Finding out that we were going to have a baby in a matter of months meant that everything in our lives would change.

Articles by Betterment Editors

By the Editorial Staff
Betterment Resource Center  |  Published: September 20, 2012

The following article is provided by Elle Martinez, personal finance blogger for Couple Money

Fast forward (just a bit) to today and I’m happy to say that our daughter is our daily sunshine when we wake up every morning. We were grateful that she was a mellow and happy baby and we’re so excited now that she’s a curious and laid back toddler.

Becoming parents has also had an enormous impact on our finances, including our goals. Here are a few adjustments we’ve made as parents.

Covering What-Ifs

For us having a baby meant building a bigger safety net. Like many parents some of our first thoughts were worries about what to do should something happen. Of course no one can plan for everything, but taking care of a few goals gave us some peace of mind.

Bumping Up Our Savings

One of the first decisions we made when we found out I was pregnant was increasing our emergency fund. We already had one that covered a few months of expenses, but our goal was to double that.

One reason was to cover bills when I took time off. Since I’m self-employed, we worked out a plan to have the money saved to cover all the bills. Taking time off from work to spend time with the baby to bond was vital to us. We didn’t want to be stressed over finances.

Increasing Our Life Insurance and Updating Our Wills

After she was born we discussed what to do if one or both of us passed away. My husband didn’t have a will and mine was horribly outdated. Our biggest concern was choosing guardians to watch over our daughter.

We’re blessed to have family and friends who were willing and able to step up should it become necessary. The hard part for us was choosing who would be the best fit. The decision wasn’t something we rushed – we took a few months to deliberate and then asked our potential candidates. Fortunately they said ‘yes’.

We then contacted a local attorney to take care of the paperwork. An added benefit of hiring a lawyer to draft up our documents was having an expert to consult about particular questions or concerns. The web can be a good place to get some general information, but we needed specific advice for our specific circumstances.

Baby Expenses – Needs, Wants, and Everything In Between

I think almost everyone has heard about the USDA’s calculator for the cost of raising a child. You can input some information about your family and it will give you its estimates based on the data received and the United States’ average.

I think many first time parents are petrified when they see the number – it’s huge and for some circumstances it can be a big expense. However when I looked closer at the expenses I noticed that ours wasn’t as high as estimated.

The average expenses for the first year on the calculator are broken up as:

  • Housing: $4,900
  • Food: $1,750
  • Transportation: $2,113
  • Healthcare: $1,063
  • Childcare/Education:$3,575
  • Clothing: $950
  • Miscellaneous: $1,113

I think by and far for most families the biggest changes to their monthly expenses are health care, childcare, and baby gear.

Adding our baby girl to the health insurance plan about doubled our premiums. We’re very fortunate that I can work from home with my daughter so that has saved us a tremendous amount of money. However, I’ve seen and heard from others how quality childcare can be a significant chunk of the budget.

Baby gear, especially for first-time parents, can be a big unknown as they have to decide what they need, what they want, and what works for their budget. With our daughter I tracked all of our baby expenses to help parents get an idea of what to expect.

Other expenses can increase, but I think that depends on what the family has before their child arrives. For example, when we bought our townhouse we bought one with three bedrooms. So when our daughter arrived we didn’t feel that we had to move to a bigger space, it was already there.

I think using the calculator can give you a ballpark figure if you need a specific amount to save, but it’s also enlightening to talk with friends, family, and neighbors to get a close to home estimate.

Baby and Gift Registries – Letting Others Lighten the Load

Creating a baby registry that our family and other loved ones could refer to when getting ideas for gifts was a tremendous help for us. Having a baby is something to celebrate and everyone kept asking us what we needed because they truly wanted to give something that would be practical.

After chatting with our friends who already have kids, we made a list of useful items that people could contribute if they wished to give us something practical. We also added gift cards for those baby expenses that can just pop up.

Thoughts on Planning for a Baby

While becoming parents has had an impact on our finances, doing some planning and adjustments has helped to make the transition more enjoyable. We’re looking forward to the years we have with our daughter as she grows up.

How about you? As parents and parents-to-be how have you changed your finances for the big change?

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