Having a baby is a joyful experience, and one of the biggest life-changing events you will ever go through. But among the emotions that are washing over you as an expectant parent, you might also be experiencing some panic about the financial aspect of starting a family. How are you going to meet the expense of supporting another person? Will you or your partner be staying home to take care of the baby? For how long? What about day care? And health insurance? Diapers and formula? Baby clothes and strollers? The financial aspects of child-rearing can be a little overwhelming, and the time to start planning for them is before the baby is born (and you and your spouse have resorted to sleeping in two-hour shifts).
First, the moment you find out that you are pregnant or even if you and your spouse are just thinking about having a baby start setting aside money as a "baby fund." Check with your employer to see if they have something called a "dependent care flexible spending account." Many employers offer this benefit, and it's an account which allows you to deduct money from each paycheck to use toward child care expenses. This is a pre-tax deduction, which means that the money in the account is not subject to income tax.
Even if your employer does not offer this benefit, you may be eligible for another tax deduction, which is the IRS child care tax credit. However, you cannot claim the child care tax credit and participate in a dependent care spending account at the same time. You must choose one tax credit or the other, depending on what works for your family.
Another thing for moms-to-be to think about is whether you are covered by short-term disability insurance. This type of insurance will cover you for approximately six weeks following childbirth, and provides 60% to 70% of your gross income for that period (although there may be a week's waiting period at the beginning of the insurance claim). Many people believe that the Family Medical Leave Act (FMLA) covers leaves of absence when you have a baby, but that is not the case. The Family Medical Leave Act does grant you time off, but it does not guarantee that your employer will pay your regular salary during your leave.
Either way, if one person is staying home to take care of the baby, be sure you can budget to live on one salary. Also, take advantage of opportunities to score baby equipment and supplies for free or cheap, such as yard sales, hand-me-downs and baby showers. You certainly aren't the first couple in the world to survive the experience, and you won't have to do it alone!
