When you welcome a new child into your family, many part of life change and money is no exception. The first year is involves many changes to your budget, spending, and more. Use these changes as a way to get ahead and know what to plan for so you can spend more time with your newly expanded family.
Change #1: Health Insurance
The initial costs associated with the birth of a child usually get the headlines. Those expenses are, by themselves, significant. What gets overlooked more often is the increase in health insurance premiums on an ongoing basis after you have a child. Most employer provided health insurance plans bucket out costs by the composition of your household. When you transition from a covering husband and wife to covering husband, wife, and a baby, this will typically bump you into another cost structure. To help prepare for the change, investigate ahead of time how your health insurance will change in your family. This can also vary for families with multiple children so don’t be afraid to ask for clarification.
Change #2: Food Costs
“The child is small and they won’t eat much” is a phrase often uttered and often proven wrong. Even a baby will add to your food costs in the first year. This will vary, of course, depending on choices your family makes about nutrition and other factors. Adapting your budget to accommodate the additional mouth to feed will be key.
Change #3: Clothing Costs
Children grow. At times, they grow very quickly. Clothing will be a part of your budget on a regular basis for the foreseeable future.
Change #4: Utilities
Expect utilities (power, water, etc.) to go up as well. According to the Bureau of Labor Statistics, households with children spend about 17% more than married couples with no children. Baths are just one dimension of this change. Look out for ways to save where it makes sense with steps like reducing energy usage.
Change #5: Childcare Costs
Childcare decisions are unique to each family. If one spouse will stay at home long term to provide care, this has a much different implication than paying for a nanny or daycare option. In any event, it will be important to talk through the financial implications of your family’s childcare choices to prevent a surprise.
Changes #6: Taxes
Yes, even your taxes will change when you add an additional family member. Tax provisions like the child tax credit will alter how your taxes come out each year. Many families experience a somewhat smaller tax burden with the changes, although it’s just one factor. If you fall in this camp, it’s a good idea to revisit tax withholding from your paycheck. If you believe your tax bill will be lower, decreasing the withholding from each paycheck could make sense.
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