The common saying that “everything’s easier with a second child” is true—to a point. Sure, you’re confident about your diaper changing skills, and you understand how to set up feeding and sleep schedules.
But when it comes to money, life can get more complicated as your family grows. If you’re planning for more children, here are a few steps you may want to take to be more financially prepared.
Reduce your debt
Eliminating debt is important at any stage of life, but when you’re expecting more children, it becomes even more critical. After all, kids are expensive. On average, each child adds nearly $13,000 to an annual family budget—and that’s not counting college expenses.
Sit down with your partner to talk about what you owe, and how you’re going to pay down existing debt, as well as avoid future debt. Look at your household budget to see if there are places where you can trim expenses, redirecting some of that money to debt repayments.
Check in with human resources
Both you and your partner will want to know what benefits are available to you as you welcome your new child into the world. Checking in with your employer’s HR department is especially important if you’ve changed jobs, as your benefits might not be the same as they were at your previous workplace. You’ll probably want to ask how the new addition to your family will affect your health and dental insurance. Also, be sure to confirm both the paid and unpaid family leave benefits offered by your employer, so you can get ready to spend quality time with your growing family.
Budget for baby purchases
You might already have essential big-ticket items, like a crib, car seat, and stroller, that translate into big-time savings because you won’t have to repurchase them. You might also have saved some infant clothes, a breast pump, and bottles. But you probably won’t have everything. Make a list of any items you need to update or replace, and consider throwing a “sprinkle,” a smaller-sized shower, to ask family and friends for assistance.
You might also want to research special discounts and programs that reduce the costs of essentials, like formula and diapers.
Evaluate your life insurance coverage
It’s not just your health and dental coverage you need to check when you’re expecting a new baby. Take a look at your current life insurance plan. You want to be sure your loved ones will be covered, if you are unable to care for them. And any time your family grows, you should evaluate your life insurance coverage and determine if it meets your expanding family’s needs.
Expand your college savings plan
If you set up a 529 plan for your newborn, consider asking family members to contribute for holidays and birthdays, so your child will have a leg up on savings when it comes time for college.
Consider long-term changes
Right now, your home or your car may work just fine for your family. But with more children entering the picture, it might be time to think about upgrades. Your children (and you!) will need more space to live and thrive, so even if you think you’ll be okay in the short-term, plan any long-term costs, such as a new home or car.
Also, consider childcare. Can your current childcare situation expand to cover more kids? What will that cost? Would moving closer to family help reduce expenses?
Another thing to consider is your household income. Will you or your partner ask for more flexibility at work? Will one of you stop working altogether? These are big questions that may be hard to answer. Talking openly with your partner can help you prepare for the financial impact and have a smoother transition.
Planning for a new baby can be thrilling and challenging. Getting your finances in order ahead of time means there’s one less thing to worry about when your little one arrives.