1. It’s time to tweak your budget.
When you have a kid, your money situation changes in ways little and big, but it’s not all bad.
“My eating-out bill went way down. We don’t really go to movies much anymore, and I used to meet girlfriends for lunch in the past, which I don’t really do anymore,” says Sanborn, the mother of a one-year-old son. “I just want to spend time with my baby.”
For me, it means that a large chunk of my earnings now go toward two big kahunas of baby raising: childcare and a 529 (more on those in a minute). Something had to give, which is why one of my first calls—after paging a lactation consultant—was to a financial planner to say: “Help! The thing we used to call our budget has been blown to bits!”
The larger lesson: She Who Possesses a Budget can face any life change, but having a child is a great time to get—or tweak—your financial plan.
2. The government pays for breast pumps.
Once I hit my second trimester, I was inducted into an enormously helpful modern-day motherhood ritual that I call “The Sharing of the List.”
It’s an emailed (or handwritten) accounting that’s packed with accumulated new-mother wisdom, from the best burp cloths to local lactation consultants who you need on speed-dial.
A coworker sent me her List (incorporating recommendations from her sister’s List), and I received another one from a long-lost cousin. Both were sweet, intimate and incredibly informative. And both screamed, in all caps: “GET THE HOSPITAL-GRADE BREAST PUMP. IT’S EXPENSIVE, BUT WORTH THE MONEY!”
To my surprise, thanks to the Affordable Care Act, the hospital-grade pump, which usually runs around $400, is now covered by some health insurances. If yours isn’t one of them, renting a pump is another option that can save you big.
3. There are ways to save on that money eater known as childcare.
Chew on this stat for a second: A recent study shows that, in 36 states, the cost of childcare exceeds in-state college tuition.
No, it’s not fair, but there are at least six ways you may be able to save. The ones that could work for you depend on everything from your work hours to your annual income. I opted for a nanny share with a friend, which will save me about 20% off the regular cost—and allow my daughter to socialize with her first potential friend, Baby Wes.
You can also take advantage of tax breaks: The IRS offers them to working parents in the form of a Child and Dependent Care Credit, which reduces your taxable income.
There’s one other big way to save: “The one thing that you always want to check on is whether your employer has a Dependent Care Flexible Spending Account,” says Sanborn, noting that it lets you put away pretax dollars to cover day care. Note: This only works if the care provider is licensed, and it may impact the tax breaks you’d get with the Child and Dependent Care Credit. So talk to a financial planner or an accountant to figure out your best strategy.
4. You don’t need to buy everything new.
“When clients tell me that they want to save for a baby, I advise them to choose the things that are most important to them—like a really good jogging stroller, if you’re a runner,” says Sanborn. “If it’s not a huge deal to you, buy it used.”
In my New York City neighborhood, the local mommy boards are so popular that they practically fuel a mini-economy of their own. On any given day, you can score a used glider, dresser or a bag of baby clothes for a song. Of course, there are certain things—like a car seat—that, for safety reasons, make sense to buy new.
5. The 529 is not a style of jeans.
Unless you’ve been living under a very heavy rock, you probably know that the cost of college has skyrocketed. When I typed in my newborn baby’s estimated year of matriculation, the college savings calculator spit back a tidy sum of more than $300K—just for a bachelor’s degree.
The 529 plan is a state-run, tax-advantaged savings program that allows you to invest money in order to pay for such college expenses as tuition, room and board, etc. At least one type of 529 plan is available in all 50 states, but tax benefits and program types vary from state to state. You can get the details about your state’s plan here. (To learn more about how 529 plans work, and other ways to pay for the costs of a higher education, check out the ins and outs of saving for college.)
The beauty of a 529 plan, aside from the tax savings, is that the sooner you start to save, the longer the money has to grow. Of course, there are many ways to supplement your own savings, including financial aid, federal grants, loans and scholarships—as well as asking children to pay for all or some of the bill.
6. Kids come first with one exception.
Have you heard that old in-flight adage about not helping others until you’ve put on your own oxygen mask? The financial equivalent is allocating gobs of money to send your kids to college, and neglecting to set aside enough for your retirement.
Why is this, you ask? It’s simple: Your kids can always take out loans to pay for college, but there are no loans to float your retirement.
So how much should you divvy up for each goal? That depends on your whole financial picture—and how far along you are toward reaching your individual retirement number.
Here’s a handy story on how to prioritize financial goals, like debt, college savings and retirement. But if you have questions that are specific to a life change—a new baby falls into this category—make it a point to consult a financial planner.
7. Don’t wait too long to get life insurance.
Sleeping in. Eating out. Drinking wine. Getting life insurance.
As I now know, these are all things that you should engage in before you decide to have a baby.
Unfortunately, I never got around to the fourth—a term insurance policy—until my third trimester. At that point, it was considerably more expensive to pick up a policy than if I’d thought to get coverage before I got knocked up.
Here’s the thing about life insurance: It’s essential if you’re a parent. And the younger you are, generally speaking, the less expensive it is to get coverage. Additionally, the less pregnant you are, the less likely it is that you’ll develop pregnancy-related health factors (say, an unavoidable spike in cholesterol levels), which can add to the cost of your coverage.
So if you’re trying to get pregnant, get life insurance now. And if you already have kids and don’t have a policy, it’s a “today” sort of to-do, not an “I’ll wait till tomorrow.”
8. Time is your most valuable asset.
If there’s one thing that changes the most when you become a parent, it’s how every waking minute seems to count at least five times as much as it did before.
At the end of the day, finding time to watch your kids grow is your new top priority. In fact, my husband and I call it “watching baby TV” because sometimes all we do after work is look at new expressions flicker across her five-month-old face.
Now that I’m back to working full-time, the hardest thing to do is fit in proverbial “me” time. Would I really rather be at the gym than with my daughter? Then again, can I really be the best mom if I don’t feel good about myself?
The calculations are endless. And I don’t have answers. But I do know that making sure your minutes are well spent is just as important as keeping good track of your dollars and cents.