Money Matters to Consider When Bringing Home Baby #2

If you are a parent, you already know how heartbreaking the birth of your first child is. Everything is new and can seem a bit scary. By the time you welcome your second child into the world, you may feel more confident, like you’ve learned a thing or two and know what you’re doing.

I certainly did when we welcomed our daughter (and second child) last October. We were more relaxed – and taking things day by day. We even dithered a bit on the prep work for the new baby because we had done that before and thought, “We have this.

I knew having a second child would change our family dynamics, but some financial aspects caught us by surprise. Here are some things I learned when my husband and I made our family of three a family of four.

Medical benefits change, as do medical needs, often affecting the costs of giving birth to a new life. Between my first and second pregnancy, my husband changed jobs, which resulted in a change in our medical insurance. A pleasant result of this change was that the cost of giving birth to my daughter was significantly cheaper than giving birth to my son.

I know that not everyone has the same luck and the costs could swing in the opposite direction. Be sure to consider the benefits of any new insurance policy, including noting copayments and deductibles. Since I found it difficult to predict in advance how much our medical expenses were going to be, it is also very important to write down your maximum outgoings, which is a cap on how much you pay for medical expenses. Covered. services in one year. Once this limit is reached, your plan will cover 100% of your healthcare costs for the rest of the year.

Also, if your company provides access to a Health Savings Account (HSA) or Flexible Spending Account (FSA), take advantage of it. These accounts can be used for eligible medical expenses and funded with pre-tax dollars directly from your paycheck, reducing your taxable income.

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Housing: It may be time to move

A growing family needs more space. We were shocked at how cramped we quickly felt when adding our second little one, especially since he barely crawls! Between all the clothes, toys, bottles and baby gear, coupled with the lack of time to get organized, we decided a move was in order sooner than we had planned. This significantly increased our budget.

In fact, housing costs make up the largest portion of the household budget for Millennials. Statistically, we Millennials are more financially conscious than previous generations when deciding whether to start or grow a family, so this may be something you have already considered. All of these things added together reminded us to review our budget and reduce any discretionary spending.

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Childcare costs: Double them!

In the United States, the average cost of in-center infant care is $1,230 per month. I learned surprisingly that adding a second child offers very little benefit in the form of family discounts – if any. Our particular daycare I reviewed only offered a 5% discount for a second child, which is quite common.

If you have a two-parent working household, you should be prepared to double the cost of childcare. This expense is one of the main reasons why a parent often takes time away from their career to raise young children – if their income doesn’t significantly exceed childcare costs.

If your employer offers it, use a flexible spending account for dependent care, which is similar to the medical FSA and funded with pre-tax dollars. This account can be used to pay eligible expenses, such as babysitting, nanny or nanny fees. You can also team up with other parents to hire a nanny to care for two families, cutting your childcare costs in half.

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Baby gear and clothes: expect to shop around

Second-hand clothes are great. I’m all about repurposing baby gear and clothes to save money, but there are some things that just can’t be salvaged because babies are, well, very messy. With that in mind, be sure to factor in the added cost of items that can’t be reused, like baby clothes that you can’t remove food stains from. Surely you haven’t forgotten how many diapers babies use. The American Academy of Pediatrics shares that families can spend almost $936 on disposable diapers in the first year alone.

Another surprise cost you should be aware of? There may be safety reminders between the birth of children who may require new car seats, cribs or strollers – which aren’t cheap.

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College Costs: Prepare for a Potentially Big Boost

The average cost of college in the United States is $35,331 per year, including tuition, books, and living expenses. With costs rising at an annual rate of 6.8% per year, what many parents of multiple children don’t realize is that by the time their second child goes to college, the cost could be significantly more. raised.

I was surprised at the difference between what we could potentially spend on our son, born four years ago, and our daughter. You can help minimize the pain of sticker shock by using an online college cost calculator, which can provide a better idea of ​​how much you need to save each month to reach your goal.

529 College Savings Plans are an excellent savings vehicle for college expenses and provide tax-deferred growth on investments and tax-free distributions when used for eligible expenses. If you start contributing early, you can really benefit from compound growth. Additionally, other family members can contribute to the account in addition to parents in lieu of birthday and holiday gifts.

There’s a balancing act required of all parents – when 76% of millennial parents are in some sort of debt. Having a second child is a big emotional and financial decision. The bags under my eyes are a little heavier and my bank account a little smaller. All that said, additional considerations easily fall by the wayside with a smile from my daughter.

While financial factors aren’t a deal breaker in your family’s growth, considering these things before your new baby arrives can affect how prepared you are when they’re finally here.

Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC-registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees and services, is available at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal trading in securities or to provide personalized investment advice. The information provided does not constitute legal, tax or accounting advice. We recommend that you seek the advice of a qualified lawyer and accountant. All opinions or views reflect the judgment of the author as of the date of publication and are subject to change without notice. All information presented here is believed to be accurate at the time of writing, but no guarantee of accuracy is given and no liability for any errors or omissions is accepted.