The prospect of being a new parent is one of the most exciting and most frightening prospects in life. While babies don’t, unfortunately, come with an instruction manual, they do come with expenses and responsibilities that can be overwhelming for new parents. With all the excitement of a new arrival, finances sometimes get pushed aside. Who really wants to balance the checkbook when there are all those cute baby items begging you to “Buy me”?

New parents have what seems like a million things to do before the baby arrives. There’s that new crib to buy along with blankets, diapers, clothes, car seats, bottles, pacifiers—the list goes on and on. According to the Department of Agriculture, the average cost of a baby for a middle-income family can be upwards of $11,000 a year.

In this newsletter, we’ll cover some of the most important things to remember when a baby is on the way and give you some tips that our Family Financial Education Foundation friends have compiled on ways to get the things you need without breaking the budget. After all, this is a time you should be able to enjoy, so we want to help you keep worries to a minimum.

More Questions

The most important thing you can do when you discover a new baby is about to arrive is talk. Finances is one of the leading reasons for divorce in America and the biggest reason finances is such an issue is because partners don’t talk to one another and make decisions together. The theoretical conversations you may have had a few times in the past will now become very real. Lots of decisions will have to be made. Nothing should be assumed unless you have discussed it together. Following are half a dozen discussion subjects to get you started. They are big subjects so allow yourselves time to talk through them thoroughly. Your Family Financial Foundation Education counselor can help you with information you need to have these discussions.

1. Will one of you stay home? If so, for how long? Could your family survive on just one income? Have you ever done so before?

2. How will you make sure you live within your means? Can you resist the temptation to use your new arrival as an excuse to purchase things you can’t afford such as a new car or a bigger home? Not everything has to fit the stereotype. Decide what’s important to you within the constraints of what you can actually afford. How will you both commit to not overspend? See the article in this newsletter with tips for saving money to help you make some decisions here.

3. Do you have an emergency fund? If not, what will you do to get started? There’s no time like the present to establish an emergency fund. Do what is possible. Remember, you’re trying to set aside savings for necessary living expenses only, not your full monthly income. Things happen. The car breaks down, you need a new washing machine, or one of you is laid off. Pare down the expenses and budget together now to set aside some money.

4. Do you have life insurance? You’ll need to be sure that if something unfortunate happens to you, your child can still maintain the lifestyle you’ve been providing. Only life insurance can provide that financial security. You don’t want to go broke buying insurance, but if you can afford it, make sure you have enough.

5. What is available through the benefits your employer(s) provides? Which of your jobs offers the best family medical coverage? Which includes your preferred doctors or gives you the most choices? Which plan will give you the best deal when it comes to labor and delivery? Find out about the health insurance reimbursement account (a flexible spending account [FSA]). An FSA requires only minor paperwork and could save you 25% or more on your medical expenses through the tax savings you will get. When is your next annual enrollment date? For many employers, changes can be made before the enrollment date when a family change such as a new baby takes place.

6. Have you thought about making a will? An important reason to have a will when you have children is to name a guardian who would raise your child if you and your spouse weren’t around. Revisit the beneficiary selections of any accounts you have. This is a good time to get out the paperwork on any retirement and investment accounts to make sure that, should the worst happen, your family is protected. While you and your spouse probably want to name each other as beneficiaries, you will likely want to name your child as a secondary beneficiary so that he or she receives the money if something happens to both of you. Be sure to find out what your accounts allow in this area. Different types of accounts have different rules when it comes to passing money on to a minor. If the account requires that the money is paid out in a lump sum, a hefty tax bill could take a chunk out of your child’s inheritance. You could name someone you trust to act as a “custodian.” The custodian can make legal choices that make sure your child receives the best result.