Finances and Insurance

How can my partner and I be sure we can afford to have a baby?

What should we do to prepare financially for a baby?

I work outside the home. What employee benefit information should I look at before getting pregnant?

What should I look for in my health insurance policy?

Can I change health insurance plans to increase pregnancy benefits?
I am not married. Will my partner's insurance cover my pregnancy?

What help is available to families with limited incomes?

How can my partner and I be sure we can afford to have a baby?

You should think about whether you can afford to support a child from birth through adulthood rather than simply the cost of having a baby. It is not just the expense of pregnancy and childbirth you need to plan for, as that is only the first step in the financial commitment that may last decades.

The U.S. Department of Agriculture (USDA) estimates that a middle-income family spends about $250,000 (not counting college tuition) to raise a child to adulthood (18 years old).

So, financial planning and preparation before you become pregnant is a very good, practical idea.

What should we do to prepare financially for a baby?

Regardless of your lifestyle and circumstances, it's almost impossible to predict how parenthood and other events will affect your life. But, here are seven steps you can take to prepare financially for a baby.

1. Assess your expenses. Figure out how much you currently have in your budget for the extra costs of having a baby and raising a child.

A baby budget includes the costs of diapers, formula (unless you are breastfeeding – it's free!), insurance co-payments, day care, furniture, equipment (strollers, car seats, etc.), clothing, education savings, and other needs. Build in a cushion in case you have unexpected medical bills.

Should there be no allowance in your budget for these expenses, you might have to cut back on your personal spending.

Almost every expectant parent, especially those expecting their first child, worries about money. But the good news is that most discover after the baby is born that adjusting isn't as hard as they thought.

2. Examine your income. Think about if you'll be living on one income rather than two after the baby comes, and, if so, for how long. Are you going back to work? Will your partner be the care provider and stop working? If you will be shifting from being a two income couple to a one paycheck family (even for a short period of time), now is a good time to start saving money, while you still have the two pay checks. Since it is hard to predict how much time you or your partner might want to take off work after the baby is born, plan to save as much as possible before becoming pregnant.

3. Pay off any large credit card debts. If you are in over your head and need assistance, now would be the best time to contact a credit counseling service. There are non-profit organizations in every state that counsel people in debt for no or little cost. They will help you with repayment plans and help you set up a realistic budget. Our resources section for Finances and Insurance  has some places for you to start.

4. Buy life insurance. It seems way too early to think about this, but you need to plan, right now, for your child if something were to happen to you. Term life insurance insures you for a fixed amount for a given premium. It is generally the least expensive life insurance option and you can change the coverage, as your family's needs change. Also remember to buy life insurance for the stay-at-home parent - if something happens to that parent, the working parent will more than likely need to purchase child care and other services.

5. Get long-term disability insurance. Get long-term disability insurance. Yes, this is something else you might resist thinking about, but the fact is, people 35 - 65 are more likely to become disabled than to die. Therefore, it's very important that the primary wage earner in the family has disability insurance. It will provide for your family if you're disabled and can't work. Check with the Personnel Department at work to see if you're covered and, if so, what the terms of the coverage are; if you don't think it's enough, you may be able to get more.

6. Make a will and update your beneficiaries. It's a major consolation to know that your child will be raised and provided for in the way you intend if something happens to you. One way to insure this is to make a will that states who should take care of your child and his or her finances (it doesn't have to be the same person, and often shouldn't be). Also check your retirement accounts. Usually you name the beneficiaries of retirement accounts like IRAs and 401(k)s when you open them. You'll want to be sure these are updated to reflect your current intentions.

7. Study your employer's maternity and paternity leave policies. It's important to know what benefits your company offers new parents. If you work full time and plan to return to your job after your baby is born, find out about your company's maternity leave policy. Thanks to the Family and Medical Leave Act, mothers and fathers who have worked at least one year for a company with 50 or more employees are entitled to up to 12 weeks of unpaid time off. You are also guaranteed to get your job back at the end of your leave. If you work for a smaller company, be sure to check into whether any maternity benefits are offered.

I work outside the home. What employee benefit information should I look at before getting pregnant?

If you intend to return to your place of employment after the birth, you need to find out about your employer's policies on maternity or paternity leave before you get pregnant. Some policies are dictated by the Family Medical Leave Act (FMLA); others are at the discretion of the employer.

Look into paid maternity leave, short-term disability, flexible spending accounts, sick leave, vacation time, flex time, new mom benefits, and paternity leave.

  • Paid maternity leave: If you have worked at a company with 50-plus employees for at least one year, you are entitled to 12 weeks of unpaid maternity leave and are guaranteed your job back. Find out if your employer offers any paid leave.
  • Short-term disability: If your employer has such a policy, typically it will pay 60%-70% of your gross income for approximately six weeks following the birth of your child.
  • Flexible spending account: If your employer offers one of these accounts, you can put aside pre-tax money toward deductibles and uncovered medical expenses.
  • Sick leave: If your employer allows you to substitute accrued paid sick leave for unpaid maternity leave, take advantage of this. Federal law does not require it, but your employer may do so.
  • Vacation time: If you have accrued paid vacation or personal time, federal law says that you may substitute it for your unpaid maternity leave.
  • Flex time: If your employer offers flex time, you may have the option of a gradual-return-to-work schedule, flexible hours, job sharing, compressed work weeks, or the chance to work from your home after the baby is born.
  • New-mom benefits: Some companies offer lactation stations, visiting-nurse services, and day care.
  • Paternity leave: New dads may also be covered by the Family Medical Leave Act (FMLA), and so may also take 12 weeks of unpaid leave under the same circumstances, regardless of whether or not mom takes her leave (unless you both work for the same company, in which case, you get a combined 12 weeks).

    What should I look for in my health insurance policy?

    It is a good idea to check out policy options or reread your current insurance policy. Often, with enough notice, you can change plans, and, based on the benefits or lack of benefits in your current policy, you may wish to do so before becoming pregnant.

    Find out if your insurance policy covers:

    You should find out if your insurance plan has a deductible, and if so, how much it is. Determine if you are responsible for a co-payment and estimate your total out-of-pocket expenses. 

    Can I change health insurance plans to increase pregnancy benefits?

    When your policy is limited in benefits or you are afraid that your out-of-pocket expenses will be excessively high, you might want to investigate the possibility of changing plans. Sometimes you can only change once a year, so this may take some forethought.

    Many insurance policies say they will not cover "pre-existing conditions". Pregnancy is not a pre-existing condition. Under The Health Insurance Portability and Accountability Act (HIPAA), federal law says that if you change group health plans while you're pregnant, your new group health insurer can't deny claims related to your pregnancy as long as the plan covers maternity. However, this only applies to group plans; if you pay for an individual insurance policy, you may not get coverage at all if you are pregnant.

    I am not married. Will my partner's insurance cover my pregnancy?

    Right now companies are not legally required to offer coverage to domestic partners. Some may do so at their own discretion.

    However, once the baby is born, the father can add the baby to his policy as a dependent.

    What help is available to families with limited incomes?

    Resources available to eligible low-income pregnant women and families are:
    • Women, Infants and Children (WIC), a federally funded program, provides coupons for free food for pregnant women.
    • Government sponsored health insurance programs, called Medicaid, MediCal, etc. (depending on which state you live in), are joint federal and state medical assistance programs for individuals and families that meet specific standards for low income and limited assets.
    • Most cities or counties have public free clinics providing prenatal care for low-income women. Check your Yellow Pages or call your county Health Department. Some hospitals will also run free or low cost clinics.
    • Many communities have privately funded facilities, such as charitable organizations and foundations, for low-income pregnant women. Ask at your local hospital or church.
    • Toll-free Maternal and Child Health Helplines in every state can help you link up with needed services.

  • Most recent page update: 10/26/2012

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