Financial Planning for a New Baby

Necessary daily items include, but aren't limited to, formula and diapers and accessories related to feeding and diapering a baby. Babies can eat five to eight bottles of formula a day in the first months, and four to six in the following months up to a year. Babies also can go through six to eight disposable diapers a day, so if you want to get an idea of what those items will cost, you should take a trip to the baby section of different stores to see the going rate of those items and approximate a monthly expense for them.

You'll want to check your health care premiums to see which plan will best cover your baby when he shows up at the hospital. Compare the costs of adding baby to each parent's insurance plan.

Potential Variable Costs In The Financial Plan

Do an analysis of your income to see how feasible caring for a baby will be on one income in case one parent decides to stay home with baby for the first year or more. Not all employers have paid maternity leave, though many are bound to the Family Medical Leave Act (FMLA).

Under FMLA, certain employers must grant up to twelve weeks of leave for that purpose without your having to worry about losing your job; however, there are no provisions under FMLA that they have to pay the employee. Speak with both employers in advance to find out what leave options are available.

You need to know what type of daycare you'll need. In some cases, you may be able to switch child care responsibilities with someone who has an alternate working schedule. You might have a grandparent who is willing to watch the baby for a certain amount of time each day. You can also look into setting up a pre-taxed flexible spending account through your job so that you can get a tax advantage on money you put aside for the care of your baby in your pre-baby financial plan.

Long Term Financial Considerations

If your fiancial plan includes budgeting for your child's education, you can start saving for your child's future before he is even born by investing in a 529 Plan, or a Coverdell. A 529 plan is a state-run college savings option where you can invest in mutual funds, or save money toward a fixed college tuition rate. There are federal tax advantages for investing in this type of plan, and some states may offer other incentives for investors. A Coverdell is similar, though the investment amount is capped, but you can have more control over the investment options. As with a 529, a Coverdell has some tax advantages.

Plan your own retirement, and do so as a priority over saving for college. There aren't a whole lot of financial options for people with little to no retirement funds, but there are plenty of options for kids who's parents don't have the money to cover tuition. There are financial aid options, school loans, scholarships, and of course, working through school.

Finally, plan for your death. Get life insurance for you and your partner. It would be extremely difficult to deal with the loss of a partner, but add the financial strain, and it can become even more tragic then necessary. Also, if you and your partner were to die unexpectedly, who would care for your child? Where would your assets go? Get a will.

Having a new baby is both exciting and a bit stressful. Create a sound financial plan, starting with where you are financially right now, and work your way through the basic costs, potential costs, and the long term costs of having a child.