When Joyce Marter, a licensed clinical professional counselor, financial therapist and author of “The Financial Mindset Fix: A Mental Fitness Program for an Abundant Life” was in her 20s, she said to her pregnant supervisor, “I look forward to having a baby when my husband and I are more ready.” Her manager’s reply: “None of us are really ever truly ready — you just take the plunge and figure it out as you go.”
When Marter was expecting her first daughter a few years later, she was still living paycheck to paycheck with huge student loans. You know what would have been better? Transitioning into parenthood with these tools from money pros.
Make changes now
We repeat: now. Not nine months from now.
“One common mistake new parents make is waiting until their baby arrives to change their spending and saving habits,” said Courtney Alev, consumer financial advocate at Credit Karma. “It may be tempting to squeeze in things like traveling and dinners out before the baby is born, but it’s important that doing fun things doesn’t lead to accruing debt. That may mean you need to do things like make a budget and chip away at paying off debts now.”
There are three things Alev said to do to make meaningful financial progress pre-baby.
Firstly, build your emergency fund. This should cover three-to-six months of living expenses, minimum. A high-yield savings account is ideal for this. Alev plugged Credit Karma Money, but there are also Bread Savings, CIT Bank and Marcus by Goldman Sachs, among others.
Secondly, contribute to a health savings account if one is available to you. It can help you pay for things like doctor co-pays, baby formula, medicine, breast pumps and more. If you max out your annual contributions, you’re putting money away that you can eventually take out tax-free, while creating a savings account that can roll over to the next year.
Third, don’t request frivolous baby registry items. If you’re worried about affording the basics, ask for gift cards or cash at your baby shower. “Small outfits and toys are fun, but a gift card can buy things like diapers and baby formula, which adds up quickly,” said Alev.
Establish savings habits
Now’s the time to revamp your thinking on savings, said Celia Karam, president of retail bank Capital One.
“Set aside a certain amount from each paycheck to go directly to your savings, so there is no temptation to spend it,” said the mother of three. “Schedule these transfers with an automatic savings plan so you regularly pay yourself first and keep on track toward your savings goal.”
When it comes to college education, it’s “never too early,” said Karam. “We started 529s when they were babies,” she said of the tax-advantaged savings plan, noting that consistently putting a little away years in advance can help you be more prepared down the line.
To that point, Jill Gonzalez, analyst at WalletHub, recommended opening a custodial savings account. “These are set up in the child’s name but managed by a parent or guardian until the child reaches a certain age, usually 18 or 21,” she said. “They can be used for various goals, including education or other expenses.”
Mental health is wealth
As Marter highlighted, many people spend more time planning their nursery than preparing themselves or their partnership for the transition to parenthood and family.
An investment in pre-baby counseling may save you the cost of impaired mental health, which is a real risk because of postpartum depression, or relationship happiness.
Marter recommends checking your insurance or Employee Assistance Program benefits or sites like PsychologyToday to find a therapist.
Enlist a pro
While you’re at it, find a financial planner, too.
“Financial planners help you create a budget and financial plan for the short-term such as managing healthcare costs and any loss of income during maternity/paternity leave,” said Marter.
When Marter and her husband learned they were expecting, they also created wills and obtained life insurance. “You can complete wills for free online and you can select a financial advisor who works on commission, so that you don’t pay anything,” she said.
Research insurance benefits
By month five, Marter said to make sure that the hospital you plan to deliver at is in-network. At this point, she also said it’s wise to identify an in-network pediatrician. “Ask your insurance provider if there are any special maternity or new baby benefits or coverages available. Learn about your out-of-pocket costs,” she said.
Marter has seen many new parents not take full advantage of resources available to them through their employers. “Consult HR about programs available for new parents. They may include leave of absence benefits or EAP services,” she said, adding that you can ask your doctor, OB-GYN or place of worship for resources, too.
Marter’s client with triplets had an army of church volunteers pitch in with childcare, meals and supplies during the first months “saving her countless dollars while preserving her mental health and marriage.”
Embrace banking tools
Karam said now is the time to be on the lookout for stress-free products, intuitive digital experiences and one-on-one support from a trusted bank. “Take advantage of products with no minimum balance requirements and eliminate costly fees like overdraft and non-sufficient fund fees,” she said.
Marter shared that free apps like RocketMoney and Mint (these two also have premium versions for a fee) are great for creating financial consciousness. “They let you know your upcoming expenses and help you manage cash flow and know your net-worth at any given time,” said Marter.