Financial Steps to Take When You’re Pregnant

THERE’S A LOT OF PREP work to complete when you’re expecting a new baby. Expectant parents have a nursery to paint, strollers to buy, doctor’s appointments to attend and nannies to hire.

But in addition to those tasks, experts say, newbie parents should be taking care of financial matters in the months leading up to a birth.

Pregnancy is a great time to check in on your financial life, says Sharon C. Allen, CEO and co-founder of Sterling Wealth Management in Champaign, Illinois. It’s an ideal time to assess your budget, emergency savings, estate planning documents and insurance needs to determine whether anything needs to be refreshed.

While not every financial question needs to be answered before the baby’s arrival, experts note that it’s easier to meet with your financial team when you’re not carting around a two-week-old.

Want to know how to financially prepare for a new baby? Here’s what to do.

Consider Your Access to Parental Leave and Other Employee Benefits
Let’s start with short-term concerns. Consider how you’ll approach parental leave and whether it will impact your budget.

Review your employee benefits or schedule a chat with human resources to determine how many weeks or months you can take off work and whether you’ll be paid all, a portion or none of your salary while on parental leave.

This step is important because many families are hit with a double-whammy after childbirth. Not only are their living costs increased by the presence of a new baby, but taking parental leave may slash their take-home pay if they need to use the Family and Medical Leave Act, which offers eligible employees 12 weeks of unpaid leave, or tap short-term disability insurance, which typically only replaces a portion of your salary. The amount you receive in short-term disability will also be impacted by whether you pay premiums with pretax or post-tax dollars. If you pay with pretax dollars, your benefit will be subject to taxes, which will reduce the overall amount received.

While reviewing family leave policies, take a moment to evaluate your health insurance and determine which prenatal visits and pediatric care it will cover. Take note: You could be on the hook for health insurance premiums if you’re taking leave from your job, says James Bayard, a certified financial planner in Baton Rouge, Louisiana. Don’t forget that you’ll need to add your newborn to your medical insurance within 30 days of the birth.

Assess Your Budget

Now that you understand what portion of your salary will be covered during parental leave, “practice living under a new budget constraint several months out,” Allen says. If you can, factor in any new expenses the baby will incur, including child care expenses and other fees, although these can be unpredictable.

If you’re tapping short-term disability insurance, there may be an elimination period before your benefits kick in. Determine whether you can survive several weeks before you receive your benefit and aim to shore up your savings in advance of that dry spell. If not, it’s time to shore up your rainy day fund.

Reevaluate Your Life Insurance

Consider whether the life insurance you have now will meet your needs. If you’re looking to add insurance, one product that can work well for new parents is term life insurance, experts say. This kind of insurance is often affordable and expires after a set term, typically anywhere from 10 to 30 years. “At the end of the term, the policy ceases to exist,” says Peter Hoglund, certified financial planner and vice president for Financial Life Planning at AEPG Wealth Strategies in Warren, New Jersey.

The idea is that a payout would help a surviving parent or a guardian care for your child, perhaps send him or her to college and pay for necessary expenses after the death of a parent. But once the child reaches a certain age and level of independence, having an insurance policy on your life would become unnecessary for those reasons, and it would expire.

Bayard notes that you can often get this policy set up while you’re pregnant. But if you’re experiencing health issues related to pregnancy, it may impact your rates and you may want to hold off, or just insure the non-pregnant parent, until six months after the birth.

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