Expecting a baby? Make these financial moves before bringing home your bundle of joy

If you’re expecting a baby, chances are you will have clothing, a crib or bassinet, blankets and other necessities ready for when your bundle of joy arrives.

Yet it is just as important to be financially prepared for the new addition to your family.

After all, it isn’t cheap to raise a child. A middle-income couple can expect to spend an average of $233,610 from birth through age 17, according to 2015 data from the U.S. Department of Agriculture.

“The thing to think about is, ‘what can I get cleared up today and off my financial plate knowing that this tsunami of stress and sleep deprivation is going to hit and probably set me back for six months,'” said certified financial planner Thomas Henske, partner at New York-based Lenox Advisors.

That’s what Chantel Bonneau, 32, set about doing when she was expecting her first child in 2019.

A wealth management advisor at Northwestern Mutual, she knew what she had to do. Yet she was surprised that she didn’t come across much financial advice when researching all the other things to do before her baby arrived.

She went through her budget and started saving, among other things.

“I saw how many parents said, ‘As soon as the baby is here, we will do all of this,'” she said. “Then one week becomes one month, which becomes one year. It just flies by.”

Here’s a checklist of what can be done ahead of your baby’s arrival to make sure your financial house is in order.

The first thing you should do is get a handle on your budget. Track your income and your pre-baby expenses.

“It is important that you have a pulse on where your dollars go, so you can make necessary adjustments instead of racking up a bucket of debt when the baby arrives,” Bonneau said.

Some things may have to go, like going out to dinner or ordering take out, in order to make room for new, necessary expenses.

“It is about prioritization,” she said.

It’s always important to have savings set aside for an emergency. You should also develop a reserve for all of the unexpected expenses that lay ahead, Henske said.

“You painted the room, you put the crib in there, but there’s all this other stuff that comes up that you have no idea what it costs,” he said.

Also, open a savings account for your child. If you have the means, you can start with depositing $10 a month. It’s also a great place for any monetary gifts you may receive for the baby.

This way, by the time your child is older and wants to do something, like go to camp or buy a car, you have some seed money, Bonneau said.

If you want to set up a tax-advantaged 529 college savings plan, you can do so before the baby is born. Simply list yourself as a beneficiary and change it to your child afterwards.

Life and disability insurance can financially protect your family in case something unexpected happens. Your employer may offer short- or long-term disability coverage, which pays up to 60% of your income if you are sidelined from work.

You may have group life insurance through your job, which offers some protection. Buying term life insurance will provide you with more generous benefits.

Even for those who aren’t working, it is still important to be covered, Bonneau said.

“They are staying at home because they are fulfilling something very challenging and expensive to replace,” she said.

Once your child is born, you have the option to buy a permanent life insurance policy for him or her.

Not only does it provide financial relief in the event of the worst case scenario, if structured properly, more insurance coverage can be added on in the future, Bonneau explained.

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That means your child doesn’t have to worry about qualifying for and buying a separate policy later in life.

“Why wouldn’t you want to protect your kids, at least a little bit, by buying policies when they are young and healthy, so they don’t have to worry about it when they are older and maybe not healthy?” Henske added.

The plan can also act as automatic savings because accumulated cash value can be accessed while they are alive.

Yes, you’ll be able to add your baby onto your health insurance when the time comes.

However, if you have the opportunity to adjust some benefits during open enrollment before the baby’s arrival, do so, Henske advised.

That includes saving money, tax-free, in flexible spending accounts that can pay for qualified health-care and dependent-care costs.

You’ll want to decide on guardians for your child and put it in writing. You can do it even if you don’t have a name for junior yet.

While parents often put this off either because they don’t want to think about it or because they can’t agree, it’s important to have a plan in place in case of emergency, Bonneau said.

Guardianship is typically part of your will. Also included in your estate plan is a durable power of attorney, health-care power of attorney and a living will, also called an advanced directive.

Getting the documents in place ahead of time will save you the trouble of trying to do it while juggling your new, busy life with the baby. It will also offer protection in the event something goes wrong during the birth.