9 month financial plan for your new baby


Adam Cecil

Adam Cecil

Former Staff Writer

Adam Cecil is a former staff writer for Policygenius, a digital insurance brokerage trying to make sense of insurance for consumers. He is a podcast producer, writer, and video maker based in Brooklyn, NY.

Published October 12, 2015|6 min read

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"Oh my gosh, you’re pregnant! Congratulations! Let’s talk about your finances."

Most conversations with expectant parents don’t go like that, but maybe they should. A baby is a huge responsibility, both emotionally and financially. New parents need to re-focus their financial plans (and their lives) around the new baby. This sounds like a huge, big deal, but it’s easier than it sounds! We’ve broken it down into nine achievable steps that you can tackle in the nine months leading up to the birth of your baby.

Most other baby sites will tell you to buy life insurance somewhere around month five or six, before your third trimester starts. However, this advice could leave new parents with more expensive life insurance policies.

Here’s the deal: on the ways that life insurance companies judge your future health risks is by looking at your weight. Unfortunately for expecting mothers, carrying a human child inside of you comes with some weight gain. So if you try to buy a life insurance policy in your third trimester, you and your baby will be weighed together, and your premium will be decided accordingly. (And no, it doesn’t matter if you plan to lose the baby weight in the months that follow.)

→ Read more about the life insurance baby bump

The best way to get around this is to buy life insurance early in your pregnancy or before you get pregnant.

If you do already have life insurance, make sure you review your beneficiaries and see if they’re up-to-date. You may also want to change your beneficiaries to include your new child – you can read more about that here.

We all know that carrying a balance on your credit card(s) from month to month is a bad idea. But when you’re young, the high interest fees might not seem like that big of a deal. Or maybe you’re enjoying a year-long grace period on interest fees. Either way, you’ve got breathing room in your budget, so what’s the hurry with paying off the balance?Of course, once you have a baby, you’re not going to want to spend hundreds of dollars every year on interest fees. Credit cards are usually the most egregious offenders, so if you have credit card debt, you should focus on trying to pay it off as quickly as possible. If you have other kinds of debt – student loan debt, medical debt, etc. – you can tackle that as well.

→ Read more about how to pay off debt

You don’t have to have everything paid off before the baby comes. In fact, being too aggressive on paying down debt may mean you don’t have enough money to afford other necessities! You should, however, have a plan to pay it off as soon as possible, and that plan should be both aggressive and reasonable enough that you can stick to it.

Having a baby is crazy expensive. In your first year, you’ll probably spend between $10,000 and $15,000 on daycare, diapers, toys, and other expenses. If you already have a budget, prepare for it to completely change.A lot of factors go into creating a budget. Pre-baby, it’s relatively simple: what new expenses do you have, what are you buying for the baby before they’re born, etc. Post-baby, things could get complicated. How much of your salary do you get during maternity leave? Will one of you be taking an extended time away from work? How much will daycare or a nanny cost?

→ Advice from a mom on how to cut out bad money habits

Remember to keep things flexible. Be prepared to make some tough decisions about your budget.

If you haven’t already had a talk with your HR department, this would be a good time to do so. Here are the basic questions you’re going to want answered:

  • How many weeks can you take off?

  • How will you be paid during your time off?

  • If your company is using a short-term disability policy to provide maternity leave, how will that work?

  • Will your health insurance or other benefits be affected by your maternity leave?

  • What, if anything, will your state provide to make up for lost income?

Your employer should provide a brochure or other information packet that lays out your options. Make sure you understand how the maternity leave will impact your finances and take it into account when building your budget.

If you’re taking paternity leave or family leave, you can ask your HR department many of the same questions. If your company doesn’t offer family leave, consider how you will meet familial responsibilities and expectations. It may require a combination of vacation and sick days to create your own family leave.

As much as you can, you should kickstart your savings for two major funds: your emergency fund and your baby fund.Hopefully, you already have an emergency fund, but you’ll probably want to add some extra cash to it to accommodate for the fact that you have an extra person in your family. Typically, financial experts advise that you hold an amount equal to six months of your salary in your emergency fund.

→ Read more on how to build an emergency fund from scratch

Your baby fund is a little different. Basically, this is a buffer that allows your budget to be a little more flexible. Use this fund for any big purchases that you didn’t anticipate, like a deluxe luxury stroller (or medical bills or food or what have you).

It’s never too early to think about college. Our favorite way to save for college is a 529 college savings plan – basically, a Roth IRA for your kid’s college career.

What do we mean by that? Basically, a 529 college savings plan is a state-sponsored investment account that lets you save money, grow that money, and then get it out tax-free. There are a bunch of other details, but that’s the basic gist of it.

Grandparents can get into the fun of 529 college savings plans, too – it’s a great and practical gift!

→ 20 actually useful baby registry items

Setting up a 529 college savings plan is easy – we’ve put together a great guide on how to find the best 529 college savings plan for your child, plus other great ways you can help save for college.

Not to retire right now, don’t get the wrong ideas. You have a lot of years of work ahead of you! Instead, this is a reminder to not let your retirement accounts dry up. A lot of women who decide not to go back to work after having a baby end up ignoring their 401(k) and other retirement accounts. Don’t! It’s super important to plan ahead for retirement, even if you’re not working a job that comes with a traditional paycheck.

Okay, you actually have thirty days after the birth of your baby to get them on your health insurance plan, but that doesn’t mean you can’t start making moves now. If you get health insurance through your employer, you’re going to want to make sure your health benefits continue during your maternity leave and that they will cover your child. For other situations, you can contact your insurance company and make sure you understand the proper protocol for adding a dependent and get the right paperwork before you become overwhelmed by the whole "miracle of life" thing.

How’s that for a vague instruction? But seriously – take this time to think about your future. Get excited for the fact that you’re about to welcome a new bundle of joy into your life! Think about all the things you want for your child: college, family vacations, the coolest toys. And feel confident that by cleaning up and refocusing your financial plan, you’ve made it easier for your family to achieve those goals.

Image: Thomas van de Weerd

Adam Cecil

Former Staff Writer

Adam Cecil is a former staff writer for Policygenius, a digital insurance brokerage trying to make sense of insurance for consumers. He is a podcast producer, writer, and video maker based in Brooklyn, NY.