When it comes to having a baby, some things are just easier the second time around. You have a better idea of what to expect. You’ve figured out some parenting tricks and you probably already have some newborn gear lying around. But the financial burden of having a second child is not on the “easy” list, and can cause a lot of stress if you’re unprepared. Here are six money moves to make when you’re expecting your second child.
1. Revisit your budget
Chances are, you had to set a budget when your first kid came along to account for diapers, wipes, baby clothes, food, furniture, gadgets and other expenses. You probably had to revise that budget as time went on to adjust for reality.
Now that you’re expecting again, it’s time to revisit your budget. Take a look at your current income and expenses and factor in the estimated costs of a new baby. You may need to reduce spending in some categories to make up for additional expenses in others. This simple budgeting spreadsheet for parents can help you make adjustments.
2. Start saving (more) now
Most practitioners schedule ultrasound appointments to confirm the pregnancy and take a look at early vital signs six to nine weeks into the first trimester. That leaves you with some time to save for a second baby.
You might need extra funds to shoulder the cost of childbirth or furnish a new nursery, but you should also strive to establish a strong emergency fund to cover at least three to six month’s worth of expenses. A high-yield savings account can help you save for a rainy day. (Our partner Fiona can help you compare current savings and money market account offers.)
3. Start gathering baby gear
To avoid mass expenditures once the baby’s born, start collecting the stuff you need early and at a discount whenever possible. Always make necessities like diapers, wipes and clothes a priority over toys and gadgets.
If you’re having a baby shower, register for items you need that you’d like to avoid purchasing. Go through your older child’s stuff and identify what you can reuse. You can also hunt for gently used baby gadgets and furniture online and in secondhand stores to save cash.
4. Re-evaluate your insurance
Major life events like the birth of a new child are perfect occasions to re-evaluate your insurance policies.
Health insurance: Make sure your health plan covers the baby’s delivery, hospital stay and subsequent care. If you feel your current health care plan is insufficient, you can switch providers once the baby is born. (The birth of a new child is a qualifying life event, so you can change coverage outside of open enrollment.) Consider the current cost of your policy. Weigh a higher premium vs. a higher deductible and look into how hard it is to keep your baby’s care in-network. Learn how to pick a health plan when pregnant.
Life insurance: If something happens to you, the other parent or both, your existing benefits may not be enough to cover the cost of an additional child. Take a look at your coverage and determine if you need to increase your benefits or purchase a new policy. Policygenius can help you figure out how much life insurance you need now that a new baby is on the way.
Disability insurance: Disability insurance protects your ability to earn income in case you become too ill or injured to work before you reach retirement. An additional child may lead you to increase your coverage amount or benefit period.
5. Figure out daycare costs
If both parents are working, you’ll need to figure out care for your new baby. You can often get a discount if your first and second child use the same provider. For example, a nanny may care for an additional child for a (relatively) small rate increase, and a day care center may offer discounted rates for your second kid. Either way, figure out your care and how you plan to afford it ASAP.
If you aren’t already using a Dependent Care Flexible Spending Account, see if you can sign up through your employer. These accounts let you contribute tax-free funds toward your dependent’s care, including preschool, summer day camp, babysitting services, daycare and more. The 2019 contribution limit is $5,000 if you’re married filing jointly or unmarried and $2,500 if you’re married filing separately.
6. Open a 529 college savings plan
The cost of higher education continues to rise. If you already have a 529 college savings plan for your first child, you should consider opening one for your second kid as well. (You can only have one beneficiary per 529 plan). The earnings on these investment vehicles are tax-free when used to pay for eligible education expenses including tuition and fees, room and board, books and other school supplies. Here’s how to open a 529 college savings plan.
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Image: Ali Deck