Financial planning for new parents

By Andrew Housser

The decision to start a family is a monumental milestone for many couples. Children can bring a lifetime of joy and happiness. Of course, those bundles of joy also can cost a bundle. The U.S. Department of Agriculture estimates that it costs an average-income family up to $14,000 a year to raise a child. That doesn't include paying for college or the lost wages of a stay-at-home parent. It is no wonder that a recent survey found that 61 percent of mothers worry about having enough money to raise their families. If you hope to hear the pitter-patter of little feet in the future, take these steps now to ensure you are better financially prepared for the costs to come.

1.Assess your lifestyle. Take a look at your current budget including income and expenses. Next, factor in new expenses that come with having a baby -- things like diapers, formula and baby gear. Daycare is another big-ticket baby expense. It can cost up to $12,000 a year to place a child in a daycare center. If one parent decides to stay home to care for the baby, can you still cover expenses? Perhaps your employer will let you switch to a flexible schedule, telecommute or cut back on your hours. Explore your options now.

2.Save, save, save. You should save at least six to nine months of living expenses (a year is even better) in an emergency fund before the arrival of your little one. The goal is to have enough set aside to pay the basic necessities including mortgage, utilities and groceries if you or your partner were to become ill, injured or unemployed. Saving for an emergency fund will be easier now, before your family has another mouth to feed. There are a lot of unexpected costs when you have children, too. The more monetary cushion you have, the better.

3.Research parental leave options. The Family Medical Leave Act ensures that you can take off 12 weeks of work after having a baby and still return to your former job. But only 12 percent of employees have access to paid leave during this time. Find out what sort of parental leave coverage you and your partner have, if any. Then determine how much time you can afford to take off, especially if it is unpaid. You may need to start cutting expenses and saving more money now so that you can afford to take off more time when the baby arrives.

4.Review your insurance policies. Health care costs in the United States for pregnancy and childbirth are the highest in the world. Hospital costs range from $30,000 for a vaginal delivery to $50,000 for a cesarean section. Insurance covers some of the cost, but you will be responsible for some portion of these expenses. For this reason, you should determine what your deductible coverage is and how close you are to hitting your deductible for the year. Check with your doctor and/or the hospital to find out what your estimated overall charges may be. Keep in mind that a premature delivery or a complicated pregnancy or childbirth will increase expenses. To help prepare, you may want to increase the amount you are putting into a flexible spending account for health care and/or child care.

Now is also a good time to review your life insurance policies. Chances are that you will need to add to an existing policy or acquire a new one to cover the high costs of child rearing should something happen to you or your partner.

Parenting places many demands on you. It can be emotionally and physically exhausting to be responsible for the care of another human being. It can be financially draining as well. Spending a few months shoring up your financial situation will enable you and your partner to enjoy those nine months of pregnancy bliss -- and the years that come afterward -- with less anxiety and more smiles.

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