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Tiny shoes and shiny cribs are some of the most fun ways to prepare for a baby.
Making sure you have liquidity and examining your health insurance? Not so much.
We asked two financial planners about the first, most important things to do with your money when you’re preparing to have a baby.
They aren’t as cute as tiny shoes – but they’re much more important.
1. Familiarize yourself with your health insurance
Pregnancy and birth are major medical events, and come with a similarly outsized bill. In the US, the average cost of an uncomplicated hospital delivery alone is about $3,000. Add in prenatal and postnatal care, and services for the baby, and you’ll probably be leaning on your health insurance.
“Get familiar with your health insurance policy,” said Patrick Meyer, CFP, AIF, CFTA, Director of Wealth Management Client Services at Unified Trust Company. “If you’re on a high-deductible versus a more traditional group plan, there could be a wide disparity in terms of what you’re asked to pay versus what the insurance company may pay.”
He’s found that younger people have a tendency to be in high-deductible health insurance plans “because they’re generally pretty healthy and it helps them keep their costs down,” and that they end up having to dip into a Health Savings Account to cover the costs surrounding a baby.
2. Make sure you have access to cash
“Make sure you’ve got liquidity,” Meyer cautioned. “You’re going to have bills you never thought you were going to have.” He recommended keeping about a year’s worth of anticipated spending “in something safe and liquid like a checking, savings, or money market account that you can get to easily without unnecessary risk.”
Brandon Moss, CFP, Director of Client Experiences at United Capital, agrees. Moss is the father of 6-year-old twins, and he said it’s important to both have access to money you might need and to decide ahead of time how you’ll spend it, when you can. “When you’re having kids. there’s so much out there that you can spend money on,” he said. “It’s important to come to an agreement with your partner around what will be important.”
Once you start prioritizing where the money will go, you can better make a financial plan for the future – and no purchase is too small. “It can be everything from the stroller that you buy to how you’re going to pay for their college,” he said. “Don’t just go out and buy the farm. People go out and buy the best crib, car seat, stroller, but in the end all of that stuff ends up in a garage sale. You want your kids to be safe, but thinking longer-term usually benefits you a lot more.”
3. Determine guardianship immediately
“The other things I think people don’t think about as much with kids are things like insurance, wills, and guardianships,” Moss said. “All of a sudden you’re responsible for something other than yourself. If something were to happen to you, there’s the additional responsibility of taking care of your kids.”
He said a lot of people who don’t have significant assets overlook their will and estate planning, and with it, establishing where their child will go should something happen. ‘They forget about the guardianship of the kids,” he said.
And there’s nothing more important than that.