Not Nearly Enough Americans Have Saved for This Major Life Event. Are You One of Them?

It's a mistake you should make every effort to avoid.

Having a baby can be a very exciting milestone. But it can also be stressful. All of the sleepless nights can get to you over time, and it's difficult to adjust to having to cater to a tiny human's every need. 

But having a baby can also constitute a financial shock if you don't plan carefully for it. Between the cost of diapers, supplies, medical care, and childcare, you could end up emptying out your savings account during that first year just to keep up.

And then there's parental leave to think about. Some companies are more generous than others when it comes to parental leave, but the sad reality is that many workers are forced to take time off without pay to welcome a baby into the world. That's why it's so important to save up for parental leave -- especially if you know you'll be looking at unpaid time off. 

But many people don't sock money away for parental leave, and that's something financial guru Ramit Sethi discussed in a recent podcast. If you're having a baby, it's essential you don’t make that same mistake.

Don't let a lack of paid parental leave drive you into debt

In the U.S., there are certain protections in place that make it so you can't lose your job if you take time off for parental leave. But while those protections might secure your job, they won't force your employer to keep sending you a paycheck while you're out of work. 

What’s more, if you're self-employed, you won't be eligible for parental leave the same way you're not eligible for sick leave or paid vacation. So if you're planning to take some time off once you have a baby, it's important to save for it. 

In fact, ideally, you should sock away enough extra money in your savings account to replace your missing paycheck in full during parental leave if you have that option. If you don't, at least save something so you're not forced to rack up tons of debt just to stay afloat.

Remember, many daycare centers will not accept a newborn younger than three months of age. And many also have waiting lists. 

As such, you might have to take a three-month-long parental leave, even if your preference is to return to work sooner. If your employer only gives you three weeks of paid leave, that's another nine weeks of missing paychecks you'll be left to grapple with. That said, you may be eligible for short-term disability that replaces part of your paycheck for a few weeks, but you'll need to check that benefit and see what you're entitled to.

Stress you don't need

Newborn babies can cry… a lot. And demand… a lot. And it's hard to manage a newborn when you're sleep-deprived and overwhelmed. As such, the last thing you need when you're adjusting to life with a new baby is a host of financial concerns. So rather than face that situation, save up ahead of time to avoid it.

If you're planning to get pregnant, start filtering extra money into your savings so you have a head start. If your pregnancy comes as a surprise, you may have a shorter savings window to work with, but seeing as how you should still, conceivably, have a seven- or eight-month heads-up, that still gives you a chance to build savings. And that could buy you more wiggle room at a time when your life changes overnight.