Patricia D. Sklar, CPA, CFA, CFP® | Wealth Advisor
Almost a year ago, I received my latest designation: Mom. I really thought the pregnancy was going to be the hard part, but what a naïve notion. I never truly understood how exhausting and challenging parenthood is until our little guy arrived. Nothing is more humbling than being too slow on a diaper change. Being a new mom, as well as a working mom, has been quite a challenge especially in this current environment.
However, I’m glad I was financially prepared for this journey. The US is one of few countries without national paid maternity leave. While the Family and Medical Leave Act (FMLA) guarantees 12 weeks of job-protected time off, this law only applies to public agencies, public and private elementary and secondary schools, and companies with 50 or more employees. Your employer decides whether, and how much you will be compensated when you go on leave. As a result, most families will need to protect themselves financially.
Whether you’re thinking about becoming a new parent or you are already pregnant, let’s start with three financial items to handle in the short-term.
Check and Update Your Medical Plan.
If you have the option to change your plan, consider the premium, deductibles, copays and out-of-pocket maximums. Confirm that the doctor or midwife you want to use is in your insurance company’s network.
Also, if you are considering in vitro fertilization, see if any of the options cover it. Make sure your plan covers maternity (most do, but it can’t hurt to double-check). Health care providers typically have someone that can help estimate all costs of care through the birth of your child. Many insurance plans will even cover the cost of a breast pump, so research your particular plan’s benefits.
Your new baby will be covered under the mother’s insurance plan automatically for the first 30 days. But you must actually put them on an insurance plan within 60 days of giving birth. If your family has separate plans, the child can be added to the mother’s or father’s plan, so determine which makes more sense financially. It is also important to make certain your pediatrician is part of the insurance plan’s network.
Prepare the Nursery, Buy Supplies ahead of time.
Before the child arrives, I recommend having the nursery essentials; a crib, changing table and chair set up as early as 34 weeks. Aside from the fact that you never know if that baby is coming early, it is just better to get these big costs out of the way. Amazon and Target delivery became my best friends during my first few weeks after birth. If I had been shouldering those costs along with the nursery and supply essentials, my bank account would have taken an even bigger hit. It was good to spread those costs across my pregnancy, so I could get used to my new normal of spending once the baby was here.
Don’t be bashful about taking hand-me-downs. Babies go through more outfit changes in a day than Beyoncé in her concerts. Also, my little one’s favorite place (besides being held) was a used bounce seat that one of my co-workers had provided.
You will likely want to have at least size one diapers, wipes, and some outfits ready at a minimum. Not all babies spend a lot of time in newborn clothes and diapers, so don’t automatically load up on just those; get clothes in different sizes. The hospitals will usually allow you to take home some supplies, so you won’t be totally without if you were ill prepared.
Pad Your Savings for Maternity Leave.
There will be a lot of costs to cover. Here are ways to do this, broken down by different categories:
- Medical Expenses: To cover medical expenses if you haven’t hit your deductible, contribute as much money as possible to a Flexible Savings Account (FSA) or Health Savings Account (HSA) so you can have a tax-free baby.
- Living Expenses: Make sure to account for normal living expenses during the period when you’re not paid. For example, if you are taking 12 weeks leave and only half is paid by your employer, then you will need to plan to cover the costs for those additional six weeks.
- Supplies: Such as diapers, clothing, formula, toys, and other items.
- Childcare: If you plan to use childcare, save enough to pay for at least two months of childcare. A day care facility will likely require the first month’s payment up front; soon after, you will likely have to prepay the second month. If you plan to have a night nanny/night nurse, enough will be needed to cover them, too. If your child will be in day care this year, then you may want to consider using a dependent-care FSA, if available.
- Emergency Fund: Keep your emergency fund intact because you never know what could pop up. Our refrigerator went out during my maternity leave and we had to buy a new one.
Maternity leave is difficult enough without having to worry about your finances. Make your life easier by getting your finances in order ahead of time, so you can just focus on being a new mom.