This is a guest post by Phil of Prime Time Money .
We’re expecting our first child in a couple of months. It’s an exciting time, filled with lots of uncertainty. Thankfully, because of a bit of preparation, we don’t have that much to be worried about financially.
Prior to deciding to have kids, every time I thought about the issue of children, the lyrics to the Harvey Danger song would repeat in my head: “been around the world and found that only stupid people are breeding…” I’m not sure if the song lyric was a slap at unprepared parents or if they were referring to the fact that anyone who decides to have a kid has got to be stupid. Either way, I’ve always felt strongly that I wanted to be *ready* before I brought a kid into this world.
Jim’s mentioned to me that he had no clue when it came to starting a family, so I thought I’d offer up a few thoughts on the subject of planning financially for your first child.
So what does it mean to be *ready* financially for a child? Here are a few steps I’ve thrown together to help you think it through:
I think most of us are pretty clueless when it comes to how a baby will affect our finances. The numbers are pretty daunting when you first see them:
“Childbirth and prenatal health care cost averaged $7,090 for normal delivery in the US… [The] US Department of Agriculture estimates that a US family will spend an average of $11,000 to $23,000 per year for the first 17 years of child’s life on a child born in 2007.” – Wikipedia
I feel like those numbers are a bit high. Still, you’ve got to put some stock in them and realize that it’s worth your time to think about how much having a baby will cost you. Want a blow by blow account of how much a bay can cost, check out this total cost of having a baby  post from last year.
Pre-Labor and Delivery
Let’s look at some ways to get a good understanding of what it might actually cost you to go to all those doctor visits and to deliver your baby in a hospital:
Ask Your Friends, Co-workers, and Family – I’d start by asking a co-worker who recently had a baby. They’re more likely to have used your work’s health care plan and your local hospital. They can give you a good idea of what they had to pay out of pocket for the delivery.
Examine Your Health Care Coverage – Take an evening to understand exactly what your current health care plan will cover. You might be able to switch to a more beneficial plan, reducing your overall out of pocket expenses for the pregnancy and delivery. We’ve currently moved to our premium plan while we’re expecting and will re-evaluate plans after our child is born.
Call the Doctor’s Office – If you already know what doctor you’ll likely be using for the delivery, place a call to his/her office and ask for a cost estimate for all the pre-labor visits and the actual delivery. They may even be able to give you an estimate based on your current insurance.
The First Year
Next, you should examine what the first year of your baby’s life will cost you. There are a lot of things to consider here. I’m not going to try and list them all, but I will refer you to a handy tool that helped me:
Use the Calculator at Baby Center – The baby cost calculator  at BabyCenter.com is an all-encompassing tool for helping you estimate what it might cost you to have a baby and take care of them in the first year. The calculator considers the basic equipment and supplies and even factors in child care and loss of one income .
Take Action to Prepare for a Baby
Now that you’ve got a feel for what it costs to deliver and raise a kid for the first year, you need to take steps to prepare your finances. Here are some ideas:
Start Saving Up – A good place to start is to make sure you have enough money saved up so that you don’t have to go into debt as a result of delivery and first year costs. Make it your goal to save up your total estimated amount by the time your baby is born. If that’s too aggressive for you then shoot for the delivery costs and half of your first year expenses.
If you’re about to start trying to get pregnant, simply divide your total estimate by 10 months, and begin setting that much aside in a savings account every month. If you’re already expecting, just use the number of months you have left. Lastly, you need a place to put your savings. Jim’s got some excellent recommendations (link to your savings account page here).
Get Rid of the Excess Debts – Bringing a child into this world gives you the opportunity to press the reset button on your life somewhat. Take advantage of this change and plan to get rid of that nagging credit card debt or student loan payment. Use this nine months to knock it out and be ready to start a debt-free life with your new baby. This make you feel better and it will free up room in your budget for these extra expenses.
Final Thoughts on Babies and Finances
The wonderful thing about preparing for a baby is that we have nine months to do it. So, even if your child wasn’t planned out perfectly on the calendar, there’s still time to get your financial act together. Take time to understand what your financial needs will be and then take action to prepare yourself. If you’d like to follow our baby story a little closer, visit my blog at FNBO Direct’s “Pay Yourself First” Challenge  website. While you’re there, I’d appreciate a vote to help advance me in the contest.
(Photo: 44444 )