my two cents

‘I’m Getting Married and Having a Baby. How Should I Plan?’

Photo-Illustration: by The Cut; Photos: Getty Images

My partner and I are expecting a baby and are planning to get married. We’ve been together for years and are on the same page about our financial decisions, but we need some guidance now that things are getting … real. We’ve always split our expenses down the middle and been fine settling up the bills at the end of the month. We talk through big purchases together and share a credit card, but we’ve never needed to merge accounts or investments in the past. We both make roughly the same amount each year and have healthy savings, retirement, and investments with plenty left over for the new expenses we’ll surely be encountering with a new family member. 

How should we prepare for a baby on the way? Do we need to start thinking about 529s and dependent care FSAs? Not to mention our tax returns and whether we should file together or separately. Do you have any resources or advice we can use to guide these decisions on investing and budgeting for a new baby as well as what we should be considering-slash-discussing in terms of finances when getting married? We’ll probably keep the same system we’re using now (as opposed to merging all our accounts), but it would be helpful to understand some shared financial goals we could work toward. For instance, I don’t even know if married couples can or should share IRAs! How much should we be putting into 529 accounts? 

It’s a lot to happen all at once, but we’re really excited about all the changes and want to make sure we’re doing things right.

Congratulations! Your ability to plan for your growing family, financially and otherwise, is great for your baby right off the bat. Research has shown that children raised in economically secure households tend to have better cognitive functions, fewer behavioral problems, and stronger reading abilities among a host of other advantages. I wish everyone could have the choice to prepare for parenthood the way that you and your partner are doing.

Which brings me to my first point: You’re already doing the most important stuff. You’re paying your bills on time, saving and investing for your future, and working with your partner to create a thoughtful and equitable system for your household expenses — that’s the trifecta of good money practices. Modeling these habits and talking about them openly will help your child learn and emulate these skills as they get older, too. And the fact that your kid won’t have to worry about supporting you someday is no small gift either — it really is true that taking care of yourself is one of the best things you can do for your children (and spouse).

But your logistical questions are smart, too. Let’s start with your upcoming marriage. It seems like your current system for splitting bills is working well, and I agree that there’s no need for any major overhauls. (For what it’s worth, my husband and I still keep most of our accounts separate, and we’ve been married for six years.) You shouldn’t and can’t combine your retirement accounts (IRA is an acronym for “individual retirement account”), and there would be no benefit to doing so anyway — you should each try to max out your respective accounts if you can afford to do so.

It’s worth talking to a professional about whether to file taxes together or separately. “Find a tax preparer and have them run the numbers both ways,” says Stephanie Genkin, a certified financial planner based in Brooklyn, New York. “Any good tax preparer should be able to tell you whether or not to file together in ten minutes or less.” In most cases, filing together will save you money, but in a few instances, it won’t. (For example, if one of you were on an income-driven repayment plan for a loan, filing together would raise your income level and your monthly bills would spike.)

Another good reason to pay for a tax preparer next year is that, once your baby arrives, there are child tax credits that you may be eligible for. A professional will walk you through the process and make sure you take advantage of them.

In terms of creating shared goals: It sounds like you and your partner are already oriented toward saving money. Your next step is to start talking about what you want to save for. This will be an evolving, nebulous topic that you discuss for the rest of your lives, so you don’t need to rush into it or make any decisions. Right now, your top priority is to just get comfortable having these conversations regularly. I recommend scheduling a time — once or twice a month, or maybe even more often at first — to talk about what’s working, what’s not, and what expenses you’re dealing with. Your budget is about to go through some wild shifts with a new baby, so it’s a good idea to create some structure around your communication now. The objective is not to avoid disagreement (trust me, you will argue) but rather, to have a system in place that you’re not having a whisper-fight at 2 a.m. about whether or not to buy a Snoo.

My own baby just turned 9 months old, and I can tell you that he has been both more expensive than I anticipated and less than I feared. Giving birth itself can cost thousands of dollars, even with good insurance (my bill was a little over $5,000 total for a relatively uneventful delivery at a no-frills hospital). Diapers are pricey. So is formula. And I invite anyone who says that breastfeeding is “free” to (a) try to breastfeed my son and (b) tally up the costs of a breast pump, lactation consultants, hot and cold pads, nipple ointment, and various weirdly shaped pillows and bolsters I needed to make involved parties more comfortable (not to mention the value of my time).

My point is not to scare you or tell you to go out and buy all these things. Rather, it’s impossible to know exactly what your baby will need in advance (besides the basics), so you’ll want to leave a lot of wiggle room in your budget and be ready to order random things online in the middle of the night. If you can find another parent with an older child who was born at the same time of year as your due date then they’ll have season-appropriate clothes that will fit your baby (and they’ll probably be grateful to get rid of them). I relied heavily on hand-me-downs and joined a local parents’ group specifically to buy things secondhand.

One thing you can’t really skimp on is child care, so you and your partner should start discussing it as soon as possible. “You want to get on the same page about when you will need it and how much it will cost,” says Genkin. “Some people just assume that their partner wants what they want, but that may not be the case. Research the options in your area and what the going rates are.” I will add that it also helps to talk to your neighbors. We share a nanny with another family in our apartment building, which is convenient and also more affordable than the day-care options near our home. You may find the opposite, of course, but the takeaway is that crowdsourcing information from other parents is useful.

You’ll also want to understand your respective employers’ family-leave policies. Depending on what they are, it might make more sense for you and your partner to stagger taking time off; I know a lot of couples who split up their parental leave (usually with the birthing partner staying home first) so that they could delay the need for child care, save money, and spend more time with their new baby.

A dependent care FSA, which allows you to put pre-tax dollars toward child-care expenses like preschool, a nanny, and even summer camp is also a great idea. You can research qualifying costs and calculate how to sign up here. (Note that you will need to keep records on your qualifying expenses so that you can submit them. This is another good thing to discuss with a tax preparer.)

I also recommend setting up a 529 plan for your child, which you can do as soon as they have a Social Security number. A 529 plan is basically like a 401(k) but for your child’s future education costs instead of retirement — any money you contribute to it is tax-deductible, and it also grows tax-free, so the sooner you start funding it, the better. “However, it’s important to not overfund this account,” says Blain Pearson, a professor of personal financial planning at Kansas State University. There’s no limit on how much you can contribute annually, but in most states, you can’t deduct more than $5,000 per year from your taxes (or $10,000, as a married couple filing jointly), so there isn’t much benefit to contributing more than that. And if your child doesn’t wind up needing all the money for school (say they don’t go to college, or they get a full-ride scholarship), then you will get hit with an extra tax penalty when you take the money out for some other use.

One other tip: “Getting term life insurance can be worth it if you have a young child,” says Genkin. (Term life insurance is a type of policy with a specified end date — say, 20 years in the future — and the death benefit will only be paid out if the policyholder dies during the chosen term.) It’s typically much cheaper than whole life insurance, and it’s designed for people whose families would be really strapped if something happened to them.

I also want to make it clear that you don’t have to rush around doing all of this immediately. The fact that you’re even asking these questions means that you’re already on the right track. And remember: You won’t do everything right, and that’s okay. You will waste money on stuff your baby doesn’t actually need or want. You will occasionally blow your budget and order dumb things online when you’re tired and desperate. I get your desire to plan, and I admire and relate to it, but there will be moments when all of these preparations will fly out the window, and you should be ready for that too.

‘I’m Getting Married and Having a Baby. How Should I Plan?’