Financial Planning for Babies

Six issues for the parents-to-be

You have a baby on the way? Congratulations! This is a momentous occasion for more than one reason. According to the U. S. Department of Agriculture, the average middle-income family will spend nearly $300,000 on their child (and that's just one).

Now don't let this get you down. Having a baby is a wonderful thing, and if money were the only issue to consider our population would have slowed considerably already. Obviously, you will need to prepare for the financial impact of having a baby. Here are some things to consider.

Health insurance

If at all possible, this should be done before the baby is conceived so that you can optimize your coverage. Make sure your prenatal, delivery, postnatal and new and well baby care are adequately covered.

Know the details of your plan. Find out the deductible or co payment (with immunizations and other check ups you'll be visiting your medical facility a lot in the next two years), make sure you have your OB or CNM listed as your primary caregiver, and interview pediatricians so that you'll know who to list as your babies. This is especially important if you have an HMO or PPO; you don't want to spend a lot of your time getting referrals and paying higher co-pays for a "specialist."

If you or your partner have recently changed jobs, try to get your previous plan to cover the entire pregnancy and delivery before making the switch; look into COBRA, the law that requires a former employer to allow you to pay your health insurance bill yourself for a period of time after you leave your job. If this means a much higher bill, see if your new job has a medical "flex" plan that you can use to pay the higher premium. If it isn't possible to carry over your old insurance, investigate your new insurance options and make sure they cover pre-existing conditions.

Whether or not you have insurance, you will definitely want to find out how much you will need to pay out for prenatal care and the delivery. You will want to make payment arrangements with your doctor or midwife, as the federal government reports that unreimbursed medical bills for an OB and hospital alone can total more than $1200. If you plan on delivering in hospital, look into how room rates are charged.

f you plan on delivering at home, you will save the price of the hospital, but some midwives will have you rent an oxygen tank and extra equipment for emergency situations. Remember too in a home birth, unless your CNM has arranged it with insurance companies before, your insurance probably will not cover the delivery.

Once your baby is born, don't forget to add her to the policy. If you don't have insurance, go to your state health department; they generally have an HMO-style plan for children, and the income requirements are likely higher than if you applied for Medicaid. This plan will help you pay for all of the baby's delivery and post-natal expenses as well as the immunizations and check ups required in the first year.

If you are not yet pregnant and you work outside the home, look into disability insurance. If your employer doesn't provide it you will want to get a policy that covers pregnancy complications. Investigate the waiting period and all of the other "fine print." This type of insurance can be a real benefit if you are required to stay in bed or at home for an extended period of time.

Get a will

Or update your old one. Name a guardian for your child and a trustee for her inheritance. If you don't do this the court will name one for you and then divide up your assets according to state law.

Family leave

How much time will you or your partner need to take off from jobs. If you are covered under the Family and Medical Leave Act you will receive up to 12 weeks of unpaid leave with continued health coverage. Also, the Federal Pregnancy Discrimination Act "prohibits an employer with at least 15 employees from reassigning you, forcing you to take leave, or refusing to hire you back because you are pregnant." For more information on this Act contact the US Dept of Labor or the Equal Employment Opportunity Commission, 800-669-4000. You can also contact your state's labor department for information specific to your area.

Child care

Should one parent stay home? Well, optimally yes, of course, however it is not always possible. When one looks at the almost prohibitive cost of child care, around $150/week plus if the sitter works from your home you are responsible for withholding income tax and paying social security, other options might be more plausible. Look into job-sharing, reducing work hours or working from home for part of the week.

While it seems, in these times, that it would be impossible to live one income, it is entirely possible to do so, and do so comfortably. Websites like this one, The Dollar Stretcher and Frugal Moms can help you identify ways to live on less, and enjoy your new baby more.


Although your expenses will increase with the arrival of a new baby, your tax burden will decrease. In fact, the extra tax exemption and the new tax credit could save the average middle-income family up to $1300 a year in federal taxes.

Baby gear

The temptation (and pressure) to start buying everything baby "needs" can be overwhelming. Before you do so, consider all of your options. Your baby could care less if her crib is $1000 or $50 and would probably rather sleep with you! Don't underestimate the value of the baby shower and the excellent finds to be had at thrift shops and garage sales. Just make sure any furniture you buy meets current safety regulations and was never recalled. This is true even when buying things new. That extra $25 or $50 you saved not buying an expensive, trendy stroller can go right into Junior's college fund.

© 1999-2017 Michelle Kennedy, used by permission.