Sunday, November 24, 2024

A new baby—such a joyous occasion, and expectant parents often enjoy the process of planning for their arrival. Decorating the nursery, filling the closet with tiny outfits, stocking up on diapers, and test driving strollers are just a few of the things needed to be done before the great event.

But all these fun “to do” items can become very expensive, and without a little planning new parents may find themselves buried in credit card debt. In fact, according to a September 2005 survey sponsored by REDBOOK magazine and Visa USA, while 76 percent of expecting parents feel they are financially prepared, in looking back 41 percent of new parents say they really were not.

So, what are expecting parents to do?

Create a Realistic Budget
As a result of the survey, Visa USA Corporate Relations spokesperson Jason Alderman says they found the big missing piece of the financial puzzle for expecting and new parents is a realistic budget.

"A budget can help guide,” says Alderman. “Do we need to cut back in other areas? Do we need to rethink some of the expenses we’re planning for the baby? Do we need to bring in more money? Does somebody need to take another job or do something different in terms of the revenue that’s coming in? But you can’t make those decisions without having a budget.”

Having a budget doesn’t ensure success, however, unless it’s grounded in reality. Alderman suggests two ways to stay grounded.

One, realize that many cheaper models provide all the safety and utility as the more luxurious, expensive models (nearly 50 percent of new parents say they overspent on a car seat, according to the survey).

Two, do the research to find out how much baby items really cost. Some items such as diapers, wipes, and clothing don’t cost as much as you might think—actually, some of these items are cheaper than 10 years ago. Visa created a Budgeting for Baby Calculator to help you through the process.

Pay Off Current Credit Cards
Newborns bring a whole new set of tensions into a family, and financial issues including credit card debt only compound the issues. It will be more difficult to find the extra money in your budget to pay down the debt because of added baby expenses. It’s easier to start your new family life off with a clean slate by paying off all credit cards before baby’s arrival.

Take Control of Credit Cards
If you plan to keep using credit cards after baby’s arrival, take firm control and pay them off every month. You may want to consider credit cards that offer cash rebates or deposit rebates into a college savings plan. However, beware—if you cannot pay the balance in full each month, interest payments will typically far outweigh any reward you earn. Browse our Card Reports section for ratings on a wide variety of available credit card rebate programs.

Plan for the Unexpected
When it comes to having a baby, the REDBOOK/Visa survey points out expecting parents are not saving enough for out of pocket delivery costs. According to the survey, 25 percent of new parents spend over $2000 for hospital charges in a normal, healthy delivery. However, expecting parents are saving an average of only $776. The good news about preparing for a larger bill is if you need it, you have it; and if you don’t, you still have it for a deposit into a savings account.

Keep the arrival of your little one joyous by determining today to take charge of your finances and credit cards. It can be done, and it’s a great start in the right direction to someday teach your child about healthy financial practices!

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