Well duh, thank you very much.
But how much can I save to get started? What do I need to ask about? What needs to line up before the baby gets here?
This article is going to do just that.
We will walk through many of the areas you might want to give consideration to before having your baby, develop a plan for saving and making arrangements so you don’t get a massive financial hit after birth and set you up to feel confident that your bases are covered. So let’s hit the ground running.
When You Find Out
- Your insurance
Hospital stays, nursery fees, anesthesiologist, hearing test, etc. are fees that can cause the cost of giving birth to skyrocket. You need to understand your insurance policy inside and out to make sure you aren’t blindsided.So you need to know the following:
– What is your maximum out of pocket?
– This is the most amount YOU can expect to pay in any year on your plan- How much will your premium increase to if you move to you + family plan?
– You want to know how much it will cost when you add your baby to your insurance- How should your insurance premium be paid when you are on maternity leave?
– Some companies ask for it to be paid directly to them out of pocket, others leave the premiums until you return to work without halting coverage. You will need to know how to pay your premiums so you don’t lose coverage- If you have a High Deductible Health Plan, what will be the new max out of pockets and deductible if you add your baby to your plan? Also, will you need to meet the new deductible at the time of the child’s birth? Basically, you want to understand what is the most money you can expect to pay for insurance, and how that value will change after having your baby.
- Short-term disability (STD)
STD replaces your income when you cannot work and allows you to get paid when you are out on maternity leave. If your company offers it, then you’ll want to have the details for the benefit.- What is the length of the elimination period?
– This is the amount of time you must be out of work before your short-term disability kicks in ( you are not paid for the elimination timeframe)
– How much of your salary will you be paid?
– How will you be paid?
– Separate check or payroll. If it’s from payroll, then it is likely you will have all your deductions removed for your insurance etc.
– Are you eligible/how long do you need to be enrolled with STD for you to benefit?STD companies dictate that you must have been with the company for at least a year before you can take a benefit. Some STDs are available as soon as you join the company, others say you must be enrolled for 6 months before using it. Whatever the rule is you need to know if you are eligible.
- FMLA – not all companies are required to participate in FMLA, for example, smaller companies with less than 50 workers are exempt, so you need to know if you qualify. You will also want to find out:
– The number you need to contact to submit the request for FMLA
– When the request needs to be completed by – some say at least 30 days before the due date
– what you will need to do while you are off on maternity leave
- Life Insurance – if there is a chance that you can up your life insurance before your child is born (say during open enrollment) then do it. Don’t wait for the birth to make a qualifying event. I hate to go morbid, but if something were to happen to you during childbirth, you don’t want your grieving spouse or partner to lose you, have to raise your baby by themselves, and simultaneously be dropped into financial turmoil. Add some term life insurance 20 years minimum (after that your child should be able to handle life on their own and not need financial help, hopefully at least)
- Long-term disability – if you can afford it, add it. It’s much more likely that you end up with a long-term disability and not be able to work than die. Although it’s unlikely, it is possible that with a c-section or epidural, that they could ‘touch’ something unexpected or hit a nerve in your spine causing some extended paralysis until your body heals. You don’t want to be caught with no income.
The First Trimester:
- Pay down as much debt as you can. Be very aggressive in slashing debt, and lowering your costs. You are trying to get to a happy medium with your bills so you can ease your transition once baby arrives
- Find out what your monthly ‘carrying costs’ will be i.e. how much money you will need to pay all your bills each month while you aren’t working and determine how much you’ll need to save to be able to cover it.
The Second Trimester:
- Decide how long you will want to stay home. Unfortunately, many employers do not offer paid maternity leave, and those that are progressive enough to offer it, only offer it for a couple of weeks, or for a small percentage of your paycheck.You need to work out how much your STD will pay, how much your maternity leave (if any) will cover, and how much you’ll have to cover out of pocket to determine how long you’ll be out.
- Start talking to daycares – You would be surprised how quickly daycares fill up. The really good, and affordable ones, can sometimes have waiting lists that are months and even a year and some long – true story it happened to me. So start talking to daycares. It will also give you an idea of what your new budget will look like so you can start saving and adjusting to the new lifestyle.
- Start saving for your maximum out of pocket cost – your max out of pocket is your worst-case scenario, the utmost you will pay for having your baby. Although there are ways to pay less for your medical bill, you will want to at least plan to have that number saved and socked away.
- Pay only the minimum payments on credit cards so you have the ability to save more. If your STD is not 100% of your salary you might need to save money to pay your mortgage, student loans, etc. (bills that don’t take credit cards) so slash expenses wherever you can.
- Change your deduction on your W4 to a higher withholding (say from 2 to 4) that way you can take home a little more in your pocket. Don’t worry, Uncle Sam always gets his cut, so even if it doesn’t balance out perfectly you are unlikely to be too off come tax season. The idea is that with the higher withholding you can keep more money in your pocket.
Just remember to switch it back to the appropriate withholding shortly after you return to work. If you don’t, then you could end up owing the IRS because you didn’t withhold enough for long enough.
- Start looking at some of the necessary baby items – crib, bottles etc. The earlier you start the better deals you can get. But don’t go overboard. You might like the clothes you buy now, but your baby could outgrow them faster than you planned – or your baby could be smaller than anticipated, and then you need to buy all new clothes again … ask me how I know).
The Third Trimester:
- FMLA – Submit your FMLA if you haven’t already done so
- Decide whose insurance your child will be on
– You have 30 days after the birth of your child to add them to your insurance. If you do not add your child within that time, he/she will not be covered and you will need to pay the hospital bill related to your child out of pocket. Side note: If your child is born when your company is switching insurance, make sure to add them to both the old and the new so you don’t get billed for an insurance mix up.
- Lower all credit card payments and other debt payments to the minimum but still ensure they are all getting paid on time.
- Get any last items that you need to get to bring your baby home the first night.
- Anything you buy (diapers included) keep the receipts so that if you need to return the diapers etc. then you can. You never know what brands your little one won’t like or be allergic to so be prepared to return if needed.
There is a reason why money is the leading reason for divorce and it’s not an argument you want to be having while pregnant or as soon as you bring your baby home.
Sure, sometimes things happen and are unexpected, but if you are thinking of having kids and starting to skip your birth control pills whether by accident or on purpose, you’ll want to line up your finances.
It’s the difference between coming home from the hospital with all your bases covered and coming home to find out that none of your baby’s stay was covered and having to use credit cards to buy food because the paycheck you planned on using to cover your mortgage while on mat leave is non-existent.