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How To Prepare Financially For a Second Baby

family of four walking at the street

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Raising one child can certainly be expensive enough (but we all know that the experience of being a parent is priceless). However, when another baby is on the way, expanding your family from one to kids can come with a whole other set of financial planning aspects that you’ll want to take into consideration before delivery day.

Speaking from experience, going from raising one child to another one entering the picture has definitely brought its set of challenges in various stages from physically, mentally, financially, and more. As mentioned above, I certainly wouldn’t trade any of it for the world. However, I know there may be other parents out there who may have questions about what to expect when they’re expecting (again), so I was pleased when I came across this article by Julia Pham, writing for Kiplinger on her own experiences and tips when it comes to getting financially ready for a second baby. She shares with us some things that she and her husband learned when their family expanded from three to four.

Lower Medical Costs

Julia said that between her first and second pregnancy, her husband had changed jobs, which resulted in a change in their medical insurance. An added benefit of that was the out-of-pocket cost for her daughter’s birth was significantly cheaper than the birth of her son. As she mentions though, others may experience a direct opposite swing in costs, so really make sure to factor in the benefits of any new insurance policies, taking careful note of the various co-pays and deductibles.

Granted as costs can vary between medical facilities, it can be difficult to project how much your medical expenses might come out to. She advises making a note of your out-of-pocket max, which is a cap on the amount of money you pay for medical services in a year. Once that limit is met, your plan should cover 100% of your health costs for the rest of the year. Another great tip is that if your employer gives access to a Health Savings Account (HSA) or a flexible spending account (FSA), use it. These accounts can be used on eligible medical expenses, with pre-tax funds from your paycheck – which will reduce your taxable income.

From my own experiences, I know when my wife and I found out we were expecting again, I made sure to select the appropriate plan during open enrollment to make sure we were prepared for the delivery next year.

We’re Going To Need A Bigger House

At first, you may think you have all the room in the world when it’s just your family of three. However, you may quickly realize you may need a home to match up with your growing family. Like Julia says, between all the clothes, toys, bottles, and other various baby accessories, along with a lack of time to organize, a move may potentially be in order. Coupled with the rise in home prices, this may result in a budget increase for your housing category should you need to move. (If you’re looking for a great piece of software to help you in your budgeting needs, check out You Need a Budget, and when you subscribe, we’ll both get a free month!)

Double The Child Care

It’s no secret that childcare costs are expensive, $1,230 per month to be specific. While some daycares can offer 5% discounts for a second child, some may not offer anything like that at all.

More so, if you’re a two-working-parent household, you can look to double the cost of care for your children. Anymore, this is a huge reason one parent might take a break from their current career to raise their young children – if their income doesn’t exceed childcare costs significantly.

One way to help offset some of these significant costs is to look into a flexible spending account for dependent care. It’s similar to the medical FSA, being funded with pre-tax dollars. It can be used for daycare, babysitting, or other nanny expenses. Julia advises maybe teaming up with other parents to hire a nanny who can care for a couple of families, in turn, cutting child care costs in half.

Time To Go Shopping?

We were fortunate enough to be able to reuse a lot of our oldest daughter’s clothing for our younger daughter, which helped save a lot on clothing. As Julia points out, and as any parent could attest to, babies are messy. If you find yourself in that category, consider the additional cost of items that can’t be reused, like stained clothing. I know our family has really enjoyed shopping at Once Upon a Child, where you can find tons of clothing for a great deal, and they look great!

And of course, don’t forget the sheer amount of diapers that babies go through. One way to save on that could be looking into warehouse clubs like Costco, or Sam’s Club. Or a subscription service through Amazon. Don’t forget too that there may have also been recalls on new car seats, cribs, or strollers since your first child was born, and those can come at a price as well.

Saving For College

Of course, many millennials may scoff at helping their children save for college while many are still saddled with college debt of their own. As college costs continue to increase at an annual rate of 6.8% per year, Julia mentions that many parents of multiple kids fail to realize that by the time their second child ventures off to the university, costs could be even HIGHER.

There are a multitude of college cost calculators available online, which can give you a better idea of how much you may need to save each month if this is an option for you.

529 college savings plans are another way to save as well, which can offer tax-deferred growth on investments, along with tax-free distributions when used for qualifying expenses. Like any investment plan, if you start contributing early enough, you can take advantage of compound growth. Also, other family members can contribute to the account, not just parents.

At the end of the day, don’t let the above scare you into expanding your family, but hopefully can provide you a little more confidence to be even more financially prepared once your new bundle of joy arrives!

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