Finances and Insurance
What can I do to prepare financially for a baby?
The expense of pregnancy and childbirth is only the first step in a financial commitment that may last decades. It's almost impossible to predict how parenthood and other events will affect your life. But, here are seven steps you can take to prepare financially for a baby:
- Look at your income. While you probably know what your income is now, keep in mind that things may change while you are on maternity leave (if that is available to you) or if you or your partner/spouse will be staying at home with the baby. Most U.S. families do not have access to paid maternity or paternity leave at this time (but support is growing for this). If you will be shifting from being a two-income couple to a one-paycheck family (even for a short period of time), now is a good time to start saving money while you still have the two paychecks. Since it may be hard to predict how much time you or your partner will need or want to take off work after the baby is born, try to save as much as possible before baby comes. If you will be a single parent, your trade-offs between being with the new baby and having enough money to pay your expenses will likely be more challenging; planning ahead would be wise as well.
- Add up your expenses. Similar to your income, you probably know about how much you have to pay each month to cover living expenses like rent, insurance, car payments, food and other things. Start looking at where you may be able to cut expenses (dining out, shopping, or other “fun” activities) to cover the extra costs of having a baby and raising a child. A baby budget includes the costs of diapers or diaper service, formula (unless you are breastfeeding, then it's free!), insurance co-payments, daycare, furniture, equipment (strollers, car seats, etc.), clothing, education savings and other needs.
- Explore your options. Doing the math can be scary, and you may realize you don’t have the extra income to pay for the baby’s expenses. There are options available to help. Here are a few:
- Government-sponsored health insurance programs (Medicaid) can help cover health care costs for you and your baby. Thanks to the Affordable Care Act, you may also be eligible for lower-cost health insurance coverage through the health insurance marketplace. You can find out if you are eligible for Medicaid or subsidized health insurance at healthcare.gov. Learn more about Medicaid at medicaid.gov.
- Each state maintains a free hotline to connect women and families to resources related to maternal and child health. You can call 1-800-311-2229 to be connected to your state’s hotline. You will be able to speak with an expert who can direct you to a very broad range of services available to pregnant women and new parents in your community.
- Women, Infants and Children (WIC) is a federally funded program available in each state that provides coupons for free food for pregnant women (and also women and babies after the birth). Find your state program at fns.usda.gov/wic.
- National Diaper Bank Network offers a directory of places to get free or affordable diapers: nationaldiaperbanknetwork.org/need-diapers-now/.
- Cribs for Kids can help you find free cribs in your community: cribsforkids.org.
- Thrift, resale and consignment stores often have gently used baby gear –and many other things your family may need – at a deep discount compared with purchasing new items. Craigslist and other online options offer similar benefits.
- If at all possible, try to pay off any large credit card debts. If you are in over your head and need assistance, now would be the best time to contact a credit counseling service. There are non-profit organizations in every state that counsel people in debt for no or little cost—find one at nfcc.org. They will help you with repayment plans and help you set up a realistic budget.
- If you can, purchase life insurance. It seems way too early to think about this, but you need to plan right now for your child if something were to happen to you. For a monthly fee (premium), term life insurance will provide a specific lump sum of money to your surviving family members if something happens to you. This is usually the least expensive life insurance option, and you can change the coverage as your family's needs change. You will want to get life insurance for both parents.
- Get long-term disability insurance. People age 35 to 65 are more likely to become disabled than to die, so it's very important that at minimum the primary wage earner in the family has disability insurance. It will provide for your family if that person becomes disabled and can't work. Both you and your partner/spouse should ask your Human Resources department at work if you're covered and, if so, what the terms of the coverage are. If you don't think you already have enough coverage, you may be able to get more.
- Make a will. It will give you peace of mind to know that your child will be raised and provided for in the way you intend if something happens to you. One way to insure this is to make a will that states who should take care of your child and his or her finances (it doesn't have to be the same person, and often shouldn't be).
- Update your beneficiaries. Check your retirement accounts (and any existing life insurance policies); make sure the beneficiaries named in them reflect your current situation.
- Review your employer's maternity and paternity leave policies. See the next question and answer for more information.
I work outside the home. What employee benefit information should I look at before getting pregnant?
If you work full time and plan to return to your job after your baby is born, find out your company's maternity leave policy. Thanks to the Family and Medical Leave Act (FMLA), mothers and fathers who have worked at least one year for a company with 50 or more employees are entitled to up to 12 weeks of unpaid time off. Under the law, you are also guaranteed to get your job back at the end of your leave.
Many companies and organizations will offer some amount of full or partially paid leave as well. Usually your employer’s leave policies are outlined in an employee benefits guide or other packet of information you got when you started your job, so you should be able to review the basic information without telling your employer you are trying to get pregnant.
Here are some other workplace benefit policies you will want to brush up on before you get pregnant:
- Paternity leave: New dads may also be covered by FMLA and may also take 12 weeks of unpaid leave under the same circumstances, regardless of whether or not mom takes her leave (unless you both work for the same company, in which case you get a combined 12 weeks). Dad’s employer may also offer some paid paternity leave.
- Short-term disability: If your employer has such a policy, typically it will pay 60 to 70 percent of your gross income (the amount before taxes come out) for approximately six weeks following the birth of your child.
- Flexible spending account: If your employer offers one of these accounts, you can put aside pre-tax money toward deductibles and uncovered medical expenses.
- Sick leave: If your employer allows you to substitute accrued paid sick leave for unpaid maternity leave, take advantage of this. Federal law does not require it, but your employer may do so.
- Vacation time: If you have built up paid vacation or personal time, federal law says that you may substitute it for your unpaid maternity leave.
- Flex time: If your employer offers flex time, you may have the option of a gradual return-to-work schedule, flexible hours, job sharing, compressed work weeks or the option to work from home after the baby is born.
- New-mom benefits: Some companies offer visiting-nurse services and/or day care. The Affordable Care Act requires that employers provide break time and a place to pump breast milk that is not a bathroom to many breastfeeding employees up to the baby’s first birthday. Many states also have relevant laws.
What should I look for in my health insurance policy and service providers?
It is a good idea to check out policy options or re-read your insurance policy. Find out if your insurance plan has a deductible and, if so, how much it is. If your pregnancy spans two plan years, find out if your maternity care will trigger two deductibles. Determine if you are responsible for any co-payments (fixed cost) or any co-insurance (percentage cost) and estimate your total out-of-pocket expenses. Ideally, your insurance policy will cover:
- A pre-pregnancy checkup
- Visits to meet with possible maternity care providers to help with your decision-making
- Prenatal tests and prenatal care visits
- A high-quality childbirth education class
- At least one postpartum checkup
- Services provided by your maternity care provider at the time of the birth
- Care provided at different birth settings (woman’s facility fee is generally the highest-cost item)
- Labor support provided by a doula (might be covered if you pursue this with your insurer)
- Anesthesia service fees (and note that some women are surprised to find that their anesthesia services provider was “out of network” and involves significant out-of-pocket costs)
- Baby's hospital costs, including a fee from the facility (often the second most costly item) and fees charged by pediatric professionals
- Sick and well-baby visits