What to financially expect when you’re expecting

Planning ahead can help ease financial jitters that come with expanding your family

While it may be impossible to measure in dollars the joy a new life can bring to a family, there’s often a hefty price tag associated with giving birth to, or adopting a child, who will eventually grow into a toddler, then transform into a teenager who wants to attend a private out-of-state college.

The cost of bringing up a child in the U.S. is rising along with everything else, as the price for a hospital delivery and child care reach new heights. Fortunately, knowledge is power. So the sooner you begin preparing for a new family member, the better. Here are some of the most pressing financial matters to consider before your bundle of joy arrives:

Determine your portion of the delivery bill

The total costs associated with being pregnant, giving birth and postpartum care averaged $18,865 in 2020, according to a study by the Kaiser Family Foundation. The report broke down the numbers, noting that vaginal deliveries cost $14,768, with $2,655 paid out of pocket by a family, and the average cesarean section was priced at $26,280, with $3,214 paid out of pocket for women who were members of large group health insurance plans. Check-in with your insurance provider and OBGYN to get an idea of how much your portion of the bill may be. This is also the time to ask about payment plans to spread out the amount over time, if needed.

Price childcare in your area

The stratospheric cost of childcare also can be a shock for new parents who haven’t investigated the price of such services. The annual cost of childcare for infants to children age four averages out to about $10,000 per child for center-based care and $8,000 for in-home care, according to the U.S. Treasury Department. Depending on where you live, the price can be lower, or much higher, rising to equal a mortgage payment in some areas. A Care.com 2022 Cost of Care Survey found the price of child care is higher for families this year with 51% of parents surveyed saying they spend more than 20% of their household income on child care, and 72% of parents report spending 10% or more.

Check out your employer’s benefits

Set up an appointment with human resources or go online to see all the benefits your employer may have for people expecting to welcome a new family member. Some companies offer paid maternity and paternity leave, assistance with adoptions, and even help with childcare. You can also help to lower your child care costs by setting aside dollars before taxes are taken out. Ask if a dependent care account is available at work and how you can sign up. You should be able to set aside up to $5,000 in pre-tax dollars to pay for eligible childcare. Typically, only one spouse can sign up for this. How much you can save will depend on your marginal tax rate. Families that use the full $5,000 can often see $2,000 in tax savings. Be sure to talk with a tax professional to determine what your individual savings may be.

Update or buy life insurance

Once you have children, or anyone else who relies on your income, life insurance is a must. Despite what you may think, it doesn’t have to be expensive or confusing. A good term policy should be enough to cover most people’s needs. Term life insurance is what it sounds like. It’s a policy that terminates at a set point in time. It should include a death benefit, with no investment, and when the amount of time you purchased the policy for – 10 years, 15 or even 30 years – ends, so does your coverage. This is why term life insurance is usually significantly less expensive than other options. You can go online and search for life insurance calculators to get an idea of how much you will need and determine the average cost for that coverage. Then, compare prices with a few different companies before buying a policy.

With reporting by Casandra Andrews

Jean Chatzky

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