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Having a Baby? Use Your Pre-Tax Funds to Save

Whether you’re planning for a baby or currently expecting; congratulations! Having a baby can be expensive, but it’s never too early to start saving.

The cost of having a baby is no small fee. Even with health insurance, labor and delivery can cost around $5,000, and without insurance, it can be upwards of $40,000. And, that doesn’t consider the care needed before a child’s birth or what to expect after. Fortunately, one great way to help with out-of-pocket costs is utilizing a Health Savings Account (HSA). Benefit Resource (BRI) is here to help you use your pre-tax funds to combat some of the costs that come with welcoming your new addition.

Let’s Start from the Beginning

When preparing for a baby, or growing with your toddler, here are some manageable steps to help you get started.

  • Switch to a high-deductible health plan. This allows you to save on monthly premiums while putting tax-free money aside in your HSA.
  • Set a monthly saving goal and stick to it. Try to do your best and max out HSA contributions. Consider what you may spend on monthly premiums and save that instead. Setting up automatic contributions in your bank account gives you peace of mind, and you don’t have to worry about doing it yourself or forgetting!
  • Hit this savings goal every year. The IRS announced 2022 contribution limits, which are $3,650 for an individual and $7,300 for a family. If you max these out for the five years leading up to the time, and you decide to have a kid, you’ll have $18,250 individually or $36,500 as a family! 
  • Consider investing. If you’re one to lean into the risky side of life, you can invest your HSA dollars. This way when you’re ready to have a child, you come out with even more savings. As a bonus, all of your gains will come out pre-tax!

HSA-Eligible Items That May Come in Handy

  • Fertility trackers and treatments
  • Ovulation tests
  • Pregnancy tests
  • Some over the counter medications
  • Prescriptions related to family planning
  • Prenatal vitamins

“A big way my HSA helped me was to prepare for a 40% loss in income during maternity leave. Since we had contributed pre-tax to our HSA before birth our take home pay was lower. That made us better prepared for the income loss. We were able to live on less while contributing to the HSA, so we were prepared to live on less during maternity leave.”

Brittany Polanco
Millennial Mom and Money Expert

What to Do in Your First 30 Days as a New Parent:

  • Add your child to your policy. Most insurance plans give you a certain period (often 30 days) to add your baby onto your plan. Set a calendar reminder so you don’t forget in all the excitement of welcoming your new bundle of joy.
  • Revisit your insurance plan and HSA. Did you know having a child qualifies for special enrollment? If after reviewing your plan you come to find your current plan doesn’t suit your new goals and needs, you can switch up your healthcare plan. Premiums usually go up with a child, so it would be worth looking into an HSA if you switch before the birth.

What to Do in Your First Year as a New Parent:

  • Use your HSA funds. HSA dollars can be used for baby supplies, postnatal care, check-ups, and more. you can also use your saved HSA funds on qualified medical expenses.
  • Revisit your Savings Goals. A new baby means increased costs, but don’t let this keep you from saving for the future. Utilize your HSA and save what you can; you never know what’s going to happen, as we’ve learned these past two years.

What to Do as Your Child Grows:

  • Prepare your finances. We said it before, children aren’t cheap. Raising a child for 18 years costs upwards of $250,000. Planning ahead for the increase in costs while raising children can help ease the burden on your wallet.
  • Invest in your future. It’s worth the time to look also into an HSA. Not only does it save you money each month, but the pre-tax money saved is invested and can grow so that there’s even more in the bank for your future. When partnered with the standard 401(k) plan, you could end up with two powerful retirement funds.

‍Know your needs, set your goals, and look ahead to the future. With discipline and planning, you can come out with more money in your pocket to spend on your new family.