Planning spares financial stress of a new child

The experience of bringing new life into the world is incomparable. It also can be overwhelming, as the finances associated with a new baby catch you off guard. With some careful planning, you can make a smooth transition into a new family budget, and that will give you more time to enjoy the child in your life.

Start your financial planning as soon as you know a baby is expected. When the baby arrives, financial planning will be the last thing on your mind, so get your finances in order now. If you have a solid system in place while you’re adjusting to parenthood, you can avoid the stress that comes with forgotten bills or misplaced documents. You also will have plenty of time to make changes to your budget and your financial goals.

Set up your current household budget. Your finances are about to drastically change, but you can anticipate those changes, using your current budget as a starting point. How much do you and your family currently spend every month? How much do you save? Are you spending primarily on needs, or wants? What parts of your spending will you be able to cut back on, to make room for the costs associated with a newborn? With a clear picture of your family’s financial behavior, you can make the adjustments you need.

Plan for long-term child care. Will you or your spouse be taking time off from work to care for the baby? If you previously survived on two incomes, and one of you will be staying home to care for the baby, there are big changes ahead. Adjust your finances and discuss the changes in your lifestyle or financial habits well in advance of the baby’s birth — this can only help in the long run. You also will need to make sure that your health-care coverage remains consistent if one of you leaves work.

If you are a single parent, a solid plan for your child’s care will be all the more helpful to you. Talk to your close family members and friends about your options. If you could use their help, it’s much better to talk to them sooner rather than later, and to be as clear and specific as you can. If you need to plan for day care or caregiver expenses, adjust your budget and do your research in advance, so that you know exactly how to proceed as soon as the baby is born.

Anticipate your costs. If you haven’t had children before, talk to relatives and friends about the costs involved. Ask them about how much they typically spent in a month, and whether they spent more than they had planned for. This should give you some idea about how your spending will change, and allow you to change your budget now so that you can cover new expenses.

There’s still more you can do: Build up your emergency fund, prepare your will, investigate life insurance and ask about college savings accounts. What’s most important is that you simply get a good head start, so that you feel prepared and confident in the first moment you hold your child in your arms.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 19 years experience in retail banking and with financial institutions in Guam and Hawaii. You can email him at


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