How to Plan Financially for Children: 5 Tips for New Parents

Whether you’re already expecting or thinking about growing your family, one of the things you won’t want to overlook is the financial impact a kid will have. It should come as no surprise that raising children is expensive, which is why it’s important to plan for all the expected—and unexpected— costs. Here are some tips to consider.

Review Your Insurance Coverage

It’s likely that, up until now, your insurance policies have covered just you and your spouse. And until you bring your new addition home, that’s perfectly fine. But before you and your partner bring home a baby, you’ll need to reevaluate and update your policies. You’ll want to make sure your baby is covered under your health insurance policy, for starters. If you have a life insurance policy, you may want to consider updating that information as well. Should the primary earner die suddenly, your household expenses will be higher than before because of the baby. Your life insurance policy should reflect this change.

Even your home and auto policies may be affected by a baby. For example, you may choose to upgrade your vehicle to something family-friendly, or you may decide to move into a house with more space. A baby can spur a number of changes in your life, and you’ll want to be sure your insurance policies and coverage remain up to date as these changes occur.

Build an Emergency Fund

The first thing that most people look at is how much money they’ve set aside for an emergency. There are a lot of things that can happen both during pregnancy and once a child is born. That’s why it’s generally a good idea to build up an emergency fund. If you already have an emergency fund in place, you may want to consider padding it a bit more just to be on the safe side.

Prepare for Time Off Work

The Family and Medical Leave Act (FMLA) requires employers with 50 or more employees to allow 12 weeks of unpaid maternity leave. Paid leave, however, is not federally mandated, nor is paternity leave. 

While some employers offer generous compensation and benefits packages for parents after the birth of a child, others do not. Take some time to figure out what policies your employer has and whether you will need to save extra money for living expenses during this time. If your employer doesn’t offer any paid time off, you’ll want to set aside funds to take care of things until you or your partner can get back to work.

Eligible Canadian residents outside of Quebec have access to Employment Insurance (EI) maternity and paternity benefits, which offer paid time off work for new parents and guardians. Quebec offers its own Quebec Parental Insurance Program for paid maternity and paternity leave. 

Consider Childcare Costs

Depending on your work situation, you may have to prepare to pay for childcare. Sooner rather than later, consider the options available in your area so you can know how much you realistically need to budget for these costs. This can vary and depends on the type of care and how many days you will need it per week. Options could include a daycare center, a live-in or part-time nanny, or a family member (such as a grandparent).

Taking time now to examine local childcare costs will help you shape realistic expectations. While you may not need to have all of this money immediately, you do need to find a way of getting that money when it comes time to enroll in childcare.

Start Saving for College

The earlier you start stashing away savings for college, the more financially prepared you’ll be when it comes time to pay for tuition. Start saving early. As soon as you’re able to begin contributing to a college savings account. With time on your side, you can accrue sizable savings from small contributions.

Bringing home your first baby is exhilarating, exhausting, and overwhelming. As you think through your to-do list, remember to start planning for the financial changes that growing your family will bring. If you’re unsure where to start, your trusted financial professional can help.