A practical approach to affording your kids from cradle to college. Bringing home your bouncing baby boy or girl should be an exciting time of celebration–not cause for worry about how you’re going to pay for feeding, clothing, and caring for your new bundle of expenses. The average family will spend between $11,000 and $16,000 during a new baby’s first year, and more than $200,000 before a kid’s eighteenth birthday. Unfortunately, a second child only doubles your costs, with little economy of scale for each additional baby. Before you start using these statistics as birth control, take a deep breath and know that you can have a family and make a comfortable future for your children while saving for your own important goals. The Wall Street Journal Financial Guidebook for New Parents shows you the way, with information on how to: • Safeguard your child’s well-being with wills, trusts, and life insurance • Best weigh your child-care options and decide whether to go back to work • Save on taxes with child-friendly tax credits and deductions plus tax-advantaged benefits at work • Manage your family’s health-care costs • Save for long-term costs by setting up a college fund • Spend smart and save money at every stage of your child’s development • Continue to contribute to your own retirement savings From maternity (and paternity) leave to flexible spending accounts to 529 college plans, The Wall Street Journal Financial Guidebook for New Parents provides all the information you need to meet your child’s expenses while also protecting your family’s financial security. STACEY L. BRADFORD reports on personal finance, with a focus on family finance, as a regular online columnist and also appears frequently on television and radio. Chapter 1 Your Maternity (or Paternity) Leave Common Misconception: Maternity (or paternity) benefits are so generous that I can easily afford to take at least three months off to bond with my baby. The Reality: Most mothers receive a measly six to eight weeks of disability payments, making maternity leave a financial strain during an already stressful time. The Bottom Line: It’s up to you alone to make your maternity leave possible. Plan ahead and start building a reserve fund to help you afford all the time off that your employer allows. Congratulations, you’re pregnant! Now brace yourself for some unwelcome news. Along with hemorrhoids and hormonal mood swings, meager maternity benefits are just one more harsh reality that no one warns pregnant women about. Once you officially announce your good news to your boss, you’ll quickly figure out that your time off with the baby could put a serious strain on your finances. Don’t kid yourself— maternity leave is no paid vacation. While most companies try to paint themselves as “family-?friendly,” the reality is that most employers provide only the bare minimum in terms of benefits required by law. That means that if you work for a large company, you may get only twelve weeks of unpaid leave. If you’re employed by a small firm, you may not get even that. Even so, don’t panic. The truth is that maternity leave is only the first of many financial challenges that will come your way as new parents. But along with learning how to change diapers and swaddle a newborn, you can master managing your money at this more complicated stage of your life, too. In this chapter I’ll provide you with all of the information and tools you need to get through your maternity leave with your finances intact. Get an Early Start The best way to budget for your maternity leave is to start saving while you’re still pregnant. With some careful planning and a bit of discipline, you should be able to afford to take as much time to bond with your baby as your employer allows. Let’s take a closer look at how one couple, Jennifer and Steven Share, managed to do it. When Jennifer was pregnant with her first child, she worked as a CPA for a small accounting firm in New Jersey. Her employer was generous and offered all of its female employees six months of maternity leave. Although the time off was unpaid, Jennifer managed to take full advantage of this benefit and bond with her baby without derailing the family’s finances. What was her secret? Before Jennifer got pregnant she found out how much time her company would allow her to spend with a baby. She then started setting aside a little money each month in a reserve fund to help pay bills once the couple lost her paycheck during maternity leave. But soon after Jennifer conceived that plan hit a snag. Steven lost his job and the couple felt what it was like to live on just one salary a lot sooner than they had planned. “I was in panic mode,” Jennifer says. At that point the Shares realized that they needed a safety net that was large enough to carry them should they both be out of work at the same time. A couple of months later, Steven found a new job and Jennifer started saving much more aggressivel