If you’re planning to start a family, your new baby might not be the only cause of sleepless nights. The financial toll can keep you up, too.
A 2017 survey found that millennial parents drastically underestimate the cost of adding a family member. Half think they’ll spend less than $5,000 the first year. The reality: For a middle-income family, average costs for the first year of a child’s life are a bit more than $12,500, according to the latest USDA data .
That’s daunting. But making these five money moves in advance can help you feel ready.
1. Figure out how you’ll handle money while you’re on leave
Look at your benefits package for details of your parental leave policy and short-term disability coverage. Depending on your company, you might also be able to tack on vacation and sick days, says Shaun Melby, certified financial planner and founder of Melby Wealth Management in Nashville.
Shore up your emergency savings to help cover any unpaid or partially paid leave time. As of March 2018, just 17% of all civilian workers had access to paid family leave, according to the Bureau of Labor Statistics—and even if you have some paid time, it may not be enough.
2. Tally future expenses
Try to anticipate some of the baby-related expenses ahead of time so you can plan accordingly.
Although it’s a one-time cost, giving birth can be a significant expense, for example. “Look at your health insurance plan’s summary of benefits to get an idea of what they cover ,” says Ryan Frailich, CFP, founder of Deliberate Finances in New Orleans. “Prepare for the worst-case scenario—reaching your out-of-pocket maximum.” After that, your insurance should pay for all covered expenses.
In terms of ongoing costs, child care can be the biggest. In many states, annual day-care fees for an infant can run into five figures—even eclipsing public college tuition , according to Child Care Aware of America. Start assessing your options as soon as you know you’re expecting. There can be lengthy waitlists for an open spot, and you don’t want to be stuck if or when you want to go back to work.