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Wednesday, December 26, 2012

Gena Bigler: From medical costs to diapering decisions, planning for baby is important

How do you prepare financially for a new addition to your family? As in other aspects of life, planning ahead for a baby is important.

One of the first things you need to do is examine your health insurance plan to determine what your co-pay will be for maternity and birth medical care. You should also examine your plan to see if it covers birth education classes or support for breastfeeding like a breast pump or consultation with a specialist. This will give you a starting point for the early costs.

Planning for a baby is an exciting time. Full-grown adults have been known to go goo-goo at the sight of all the tiny things people buy for baby. Despite the tiny size, babies can have a barn full of accessories. Besides cribs and high chairs, there are bassinets, play yards – and that is just the “big” stuff.

One of the biggest expenses for most working families is child care. Deciding between staying home with a child or hiring child care is a major financial decision for most families. Check with a few day care centers in your area. Most are happy to provide their fee structure and will offer a time for you to visit and see where your child might spend their days.

Some private sitters keep a few children in their home. This is often more affordable and provides a more intimate family-style situation. You could also hire a private nanny or an au pair a young foreign person, typically a woman, who helps with housework or child care in exchange for room and board. With au pairs – typically a young person from another country – cares for children in exchange for room and board. The intent is that they experience your country as part of your family. A nanny cares for your child as you determine. Both these care providers can be quite expensive. However, if you have multiple children that require care, a nanny might be a more affordable option than multiple daycares.

Next, deciding how you will feed and diaper your baby impacts budgeting for the next couple of years. Cloth diapering is much more affordable over the course of your baby’s diaper wearing. The upfront cost of buying cloth diapers is considerable and can be a few hundred dollars, depending on the type of diaper you decide to use. Cloth diapers can be used for more than one baby or resold to recoup some of the cost. While they are convenient, disposable diapers can cost $800 per year or more. Some day care centers will only accept disposable diapers. This may be an important factor to consider.

Feeding your baby is another major decision. Breastfeeding is considered best for the baby. The nutrients and antibodies provided in mother’s milk cannot be duplicated in a lab. Financially, breastfeeding is also the best decision. Formula alone will cost an average of $1,500-$2,000 per year. Added to that is the expense of multiple bottles, nipples, and other accessories. Breastfeeding requires mom to eat a few more calories and may require a breast pump, which is often covered at least in part by most health insurance plans. Breastfeeding babies may need a few bottles as well. There are also indirect benefits of breastfeeding. It’s generally accepted that the breastfeeding mom is less likely to get breast cancer and that breastfed babies tend to be healthier.

Car seats are a necessity. The less you spend upfront on a car seat, the more likely it will have to be replaced quickly. More expensive car seats tend to have higher weight ratings, which allows the child to use them for longer. All car seats are not the same. Do your own research and carefully weigh cost versus benefits to decide which one is right for your family. Keep in mind that spending a little more upfront may save a lot over the life of the car seat.

Beyond buying all the baby stuff, there are other financial considerations. Revamping your estate planning to reflect your new family is a good idea at this time. If you have a will, great planning! Just revise it to include your child. If you don’t have a will, this is a good time to write one. Reviewing any life insurance plans you have is also a good idea. Most parents don’t have enough life insurance to cover the family needs if tragedy occurs. Consider visiting with your financial planner to discuss further.

For me, there is nothing more rewarding than parenting. But preparing to add a little person to your life is a big decision. The more prepared you are the more you will be able to enjoy it.

Click here to read more columns from Gena Bigler.

Gena Bigler is passionate about public service and credits her time serving nonprofits in AmeriCorps and Volunteers in Service to America (V.I.S.T.A.) with teaching her extreme budgeting and bargain shopping. Gena is now CFO of McNay Settlement Group and serves on the board of the Lactation Improvement Network of Kentucky (L.I.N.K.). Gena would be happy to hear from you at lgbigler@gmail.com.



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