Becoming a parent is one of the most rewarding experiences in life. However, parenthood isn’t cheap. From those exciting prenatal appointments to the bittersweet planning for college, it’s important to keep track of expenses and be financially conscious of spending. Creating a plan to follow will ensure you don’t lose sleep over any financial changes or opportunities — trust us, your new bundle of joy will do a great job at keeping you awake.
Here are the top five financial tips for soon-to-be new parents:
- Review your BUDGET
Everyone says babies are expensive, but most don’t run the numbers. According to a recent report, the average cost of raising a child today is roughly $20,000 a year. Keep in mind that this amount factors in housing, which typically makes up 30% percent of the total expenses. Then comes food, which is around 18%. Still, it’s a steep but loving price tag, and worth considering when building your budget.
The single smartest way to prepare for a new child financially is to be aware of all the costs and potential bills you’re likely to accrue. Preparing means checking with your insurance company to see how much the hospital visit will cost, finding a recommended pediatrician in your insurance network, and factoring in the extra monthly budget for childcare, formula, and other essentials.
Staying on top of your spending will help reduce the risk of unexpected bills and keep your focus where it should be — on your baby-to-be.
- Plan for BEFORE baby too
For first-time parents, the idea of planning for a newborn can be so overwhelming and exciting, that they only plan for the newborn time period. The 9 months prior to that is also important to plan for. We recommend dividing your budget into two different parts: before you give birth and after you take your baby home.
For your “before budget,” be sure to include the essentials like appointment co-pays, classes, the items you’ll need to set up your nursery and more. Also remember to reach out to your human resources department to discuss all things maternity or paternity leave, as this is one of the most significant factors people tend to put off until the last minute when planning for a newborn.
Your “after budget” should include everything from daily diaper runs, wipes, food, anticipated child care expenses, and more. The more items you can plan for ahead of time, the better off your baby budget will be in the long-term.
- Create a rockin‘ registry
If your newfound budget has you a little startled, you can help mitigate some of those spends by creating a baby registry. Where most people tend to ask for the expensive (or just plain discretionary) items, you can narrow your registry down to the essentials (tons of diapers, baby clothes, strollers, car seats), which you can then use to help free up some budgetary wiggle room in your bank account.
Moreover, if you have friends or relatives who recently had babies, try checking with them to see if they have extra clothing items, books, and toys they can pass down you. Babies grow fast, so chances are you can snatch barely-worn items and give your budget more relief.
- Get a head start on saving for college
We get it: Budgets are tight, and when you can free up room in your monthly spending, that amount usually goes toward something else. The painful truth is that the earlier you start saving for college, the better off your child will be. That’s why it helps to start saving for their future immediately. It doesn’t have to be much (yet), but it needs to be consistent. If you start with a goal of saving an extra $500 or $1000 a year, you could have a healthy college fund waiting for them by the time they turn 18.
While it’s important to start saving for college, you shouldn’t prioritize this over your retirement savings. After all, you can always borrow money for college — the same can’t be said about retirement.
- Create a plan to protect your family
It’s never too early to create a will, and with a new baby on the way, now’s the perfect time to get that out of the way. As unsettling as it may sound, you’ll want to designate a guardian (or guardians) for your child — that way a court won’t have to. If you don’t have good life insurance yet, make sure to purchase a policy that will help your family find some financial peace of mind.
With a growing family, now’s a good time to start thinking about estate and insurance planning. Getting a head start on developing your estate and emergency plans will help alleviate stress in case something unforeseen happens, and it will help everyone rest a little easier knowing your child’s future is adequately planned.
For more effective short and long-term planning tips, reach out to FJY Financial today.