Financial Prep Before Baby | WaterStone Bank

When you find out you’re pregnant, you probably don’t immediately start thinking about bank accounts and tax forms. But financial planning before a new baby is just as important as scheduling your doctor visits and preparing a nursery.

A new baby is exciting but also pricey: Studies show that many people underestimate how much it costs to raise a baby. You can get a leg up by planning ahead for the costs and financial decisions you’ll face in the months to come.

Here are a few money considerations to help you prepare for a new baby.

1. Get to know your health insurance coverage.

The cost of pregnancy and delivering a baby varies depending on your insurance coverage. Even with insurance, you could spend thousands of dollars to meet your deductible or out-of-pocket maximum as the costs of pregnancy add up. Reach out to your insurance provider as soon as you become pregnant to determine what will be covered and what you should expect to pay out of pocket.

2. Consider your childcare options.

Soon enough, your baby will be here, and you’ll need to make decisions about childcare, if you plan to use it.

The going rate for childcare ranges depending on where you live and what kind of provider you prefer; an in-home nanny is usually more expensive than a day care center, for example. In 2019, the average weekly cost of a nanny was $565 compared to $215 for day care, according to

Ask friends and family for recommendations, shop around, and consider a variety of options, including help from nearby family members if they offer to pitch in.

3. Budget for life insurance.

Now that you have a little one on the way, it’s a good idea to purchase a life insurance policy to ensure your family will be taken care of if anything happens to you. Research your options to find a policy that fits with your goals and your budget. Shop around and ask for quotes from a few different insurers. Now is also a good time to write up a will, if you haven’t already.

4. Look into college savings plans.

Higher education is expensive, but if you begin saving early, you can make a serious dent in your child’s college education savings.

Consider opening a 529 plan to set aside money for education. In Wisconsin, 529 investments work similarly to 401(k) or IRA plans, according to the Wisconsin 529 College Savings Program. The money you contribute is tax deductible, and you get to choose how to invest it.

5. Understand the tax implications of a new baby.

You can claim your child as a dependent on your tax return, which reduces your taxable income. After having a baby, you can also adjust the withholding amount on your W-4 to increase your take-home pay.

There may be additional tax benefits depending on when your child was born, whether you pay for childcare, and whether you adopted a child. Check out this comprehensive list of baby-related tax tips from Turbotax.

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