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Having a Baby

ONCE A BABY arrives, you quickly discover two things are in short supply: time and money. According to the Department of Agriculture’s Expenditures on Children by Families study released in January 2017, it costs $233,610 for a middle-income family to raise a child through age 17, figured in today’s dollars. Annual costs in the first three years are pegged at $12,680. How can you prepare your finances?

Stockpile cash. The more you have in a savings account, the easier it’ll be to handle medical costs, buy all the baby paraphernalia, pay for babysitters and daycare, and more.

Assess living expenses. A pile of savings will help if one parent won’t be working for a few months. What if one of you plans to stay home for the foreseeable future? You could quickly run through your savings, unless you take steps to cut back your living expenses. That isn’t easy to do when you have an extra person to clothe and feed, and you might also need a larger home. Still, you will likely enjoy your new child more if you aren’t financially stressed.

Check your employers’ policies. See what the rules are regarding maternity and paternity leave. Find out what childbirth expenses will be covered, how much it will cost to get your new baby added to the health plan and what out-of-pocket medical costs you might face.

Revise your wills. Both of you will need to update your wills to name a guardian for your newborn, just in case you both die prematurely.

Boost life insurance coverage. You may have some coverage through your employer. But with the arrival of the baby, you will likely need a larger policy. Don’t necessarily purchase this additional coverage through your employer. The premiums could be relatively high because they reflect the health of all employees, who on average may be older and some of whom will smoke. You will probably want coverage not only on the life of the employed parent, but also for the stay-at-home parent. A death in either case would mean significant additional ongoing costs.

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