Financial Planning for Baby: Paying Down Debt vs Building Savings

Financial Planning for Baby: Paying Down Debt vs. Building Savings | Baby Chick

Financial Planning for Baby: Paying Down Debt vs Building Savings

You see the positive blue lines on the pregnancy test and your head starts spinning. There is so much to do before your newborn arrives and you start to feel like you won’t have enough time. There are many doctor appointments, you have to get the nursery ready, start finishing up any projects at work, and you have an urge to get your money in order. No matter if you’re expecting your first child, your second child, or even your fifth child there is always so much that needs to be done in just those short nine months. Financial stress can always take a front seat to all of the worries you’re facing. One question expectant parents are faced with is whether or not to build your savings or pay down debt before the baby comes.

Actually the best advice is to do both, but let’s be honest, building a savings while paying down debt can be pretty impossible.

If you have to pick one area to focus on then you should be building a savings cushion.

To start, it’s recommended for families to have an emergency fund of at least $1,000 because having a savings can be a big relief during a financial setback. That cash reserve can be there if something breaks without warning such as needing your car repaired or your fridge goes out in the middle of summer. After you have the $1,000 saved it’s time to build a bit more of a cushion, especially if you are pregnant or planning to become pregnant.

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When you are trying to financially prepare for a baby you not only need an emergency fund, but you also need to build a savings for your insurance deductibles. Already having the amount of your insurance deductibles in the bank will make the day those hospital bills start arrive a lot easier. When your sweet baby is around four weeks old you will start receiving bills from the hospitals and doctors. One look at those bills and it could be enough to send you into panic mode.

On average it costs around $13,000 to have a complication-free hospital birth in the United States.

That doesn’t even include if your little one needs to spend any time in the Neonatal Intensive Care Unit. The average NICU costs around $3,000 a day in the United States. Luckily insurance will help cover the majority of the cost; however, you will still be liable for the deductible or out-of-pocket maximum. Most states put the birth of a baby under the mother, but if your baby has any other medical needs and needs to go to the NICU then the child becomes listed as their own patient. At that point not only do you have the mother’s deductible, but now you also have the child’s deductible. Most insurance deductibles can be anywhere from $500 to $1,000 per person. So a great tip when you’re expecting is to have two times your deductible in a savings account–one for you and one for the baby.

Once you have your emergency fund and your deductible amounts saved then you take care of any last minute items. You may need to buy a few of the bigger items for your baby like a crib, changing table or car seat. Once you have your savings built now is the time to finish getting any last pieces you may not have received at the baby shower. After you have everything for your little one purchased and ready to go then you can switch your focus to paying down debt.

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The first place to look when paying down debt is your credit cards or store cards.

Those typically have a higher interest rate than any bank loans or mortgages. When you are ready to start paying down your debt then you have to pick which method you want to follow. The first way is to pick the card with the lowest balance and work your way up from there. You start with paying off the smallest balance debt first while paying the minimum payment to all your other bills. Once your smallest is tackled you take that amount and apply it to the next lowest debt amount. This is called the debt snowball, which is great because you build up momentum when paying off the smaller debts and keep it going all the way through.

The next way to pay down debt is to pick the card with the highest interest rate. By picking the card with the highest interest rate and paying it down first then you will be saving more money in the future. For instance, let’s say your credit card charges 15% interest rate annually and it has a $3,000 balance with a $60 minimum monthly payment. If you pay just the minimum payment without any extra then within a year you could be paying over $400 in interest. This method works really well if you have one or two debts that have significantly larger interest rates than your other debts.

Whichever way you choose to start paying down debt is fine. You need to pick a method that will work for you and your family then stick with it. Once you have your emergency fund and the amounts of your insurance deductibles saved you will breathe a huge sigh of relief. Then you can spend the remaining time of your pregnancy preparing the nursery while making a dent in your debt.

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It may seem scary, but getting on top of your finances during your pregnancy will put your mind at ease and help you to enjoy your sweet newborn!

About the Author /

Wife, Mom, MBA, Certified Financial Planner, and a budget and financial strategist helping families pay off debt and live the life they've always wanted at https://merelynne.com/.

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📷: @boo.b.ltd
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📷: @humorandwine⁠
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Instagram post 17899717765403522 ❤️ How to Help When Visiting a New Mom – Podcast Ep 21 ❤️⁠
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Becoming a new mother, whether it be your first baby or your sixth, is filled with so many emotions. 🎢 Figuring out your new normal can take a minute as you recover from giving birth and get to know your new baby. People will be at your doorstep in no time wanting to congratulate you and meet your baby, but sometimes people aren't necessarily thinking about what they can do for YOU to be helpful. If you know someone who has recently had a baby or if you are currently expecting, today’s podcast episode is for you! ❤️ {Link in bio!}⁠
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This episode is brought to you by @skylightframe. It's a digital picture frame that has a touch-screen display that documents all of your family’s special moments—a great gift for yourself or for an expecting or new mom. If you want to bring a nice gift when visiting a new mom, be sure to check out Skylight Frame and use our discount code BABYCHICK for $10 off your order! #ad #skylightframe⁠
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Instagram post 17920976449353517 💪 Mom Hacks for Staying Fit After Having Kids⁠
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Going to keep it real here, your fitness game is going to change after having kids. If you were crushing it before having babies, you're going to find that the free time for working out isn't what is used to be.⁠
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Regardless of where you were at, there are things you can do to make your heath a priority and be a good example to your little ones.⁠
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1. Don't rush back. There's no gold star here. Take your time, get the clearance from your OB/midwife and start when you're ready.⁠
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2. Schedule your workouts. Like most things in life now, you're on a schedule. Create time in your new life for you -- you'll thank yourself later.⁠
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3. Ask for Help. Chances are high that the Mom down the street is looking for some kid free time as well. You take an hour, she takes an hour and we're all better off for it.⁠
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4.  Embrace the little things. Your day will present opportunities to get your butt moving. Find them.⁠
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5. Get a new outfit. Because, duh.⁠
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6. Join a fitness community. It's scientifically proven that external motivators work when it comes to starting and sticking with a fitness routine. Utilize your community for support and motivation.⁠
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Words & 📸 : @juna.moms⁠
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When you meet your baby(ies) and your whole world changes. 💕
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Instagram post 18110828746014338 The first year after baby is the leading time when marriages break up. The extra stress, lack of sleep, and major life changes can all contribute to communication breakdown and losing intimacy. 💔 That's why protecting relationships is such an important part of postpartum planning (done in pregnancy). Parenthood is an emotionally provocative experience. These heightened emotions help you tune into your baby's needs, but it can also help you tune into each other.⁠
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Speak your partner's love language in postpartum. Send this resource to your loved one so that they can make you feel loved and supported in a meaningful way.⁠
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Instagram post 17934950050319412 EXACTLY! 🙌 I wish more moms knew this and didn't feel pressured to say yes automatically to guests--of course, unless they want to! 😊 But you can always say no and not right now. Take your time to bond with your new baby. If you want people to come over, great! But don't feel bad if you don't and want more time alone with your family. People who love you should understand. ❤️⁠
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Instagram post 17857907638591275 Dinner time with toddlers can oftentimes be hectic and stressful. Sometimes they’ll eat what you’ve made them and other times they won’t. 😒 We’ve been there! This is why we are sharing two yummy dinner recipes that have been toddler approved that the whole family can enjoy—Taco Pizza and Stuffed Sweet Potatoes! 😋
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We substituted sour cream in these recipes with @stonyfield YoBaby yogurt because it provides not only the calcium they need, but also probiotics, protein and vitamin D! 👍 (Our pediatrician says our little guy needs 2-4 servings of dairy per day!) The yogurt still has that tangy flavor that you’re looking for but with even more benefits! Cheers to full tummies and happy families! 🙌 #ad #stonyfield
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Instagram post 18010968127252794 Did you know that in some locations there are Mother's Milk Banks (@austinmilkbank)? They are nonprofit banks that collect donor human milk for babies in need. We love mamas like @lololovelyco who are donating their milk while also breastfeeding! I wish I had made enough milk when I was breastfeeding my son to have done the same. But I'm so grateful for mothers who can! Spreading the love to all of you milk making mamas! 🤱💗⁠
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