Bringing a child into the world is no small decision. Aside from the whole responsibility that goes hand in hand with creating a human life and making sure turns into a happy healthy adult, becoming a parent is also a big financial decision. According to the US Department of Agriculture, middle-income families can expect to pay around $15k per year to raise a child, which is a lot more than many people anticipate when they make the decision to start a family.
Budget, Budget, Budget
Making a budget and sticking to it is really important. While you can’t always account for incidentals like a hospital visit or unexpected home repairs, avoiding overspending on food or personal items really adds up over time. Use an app like mint.com to help you keep track of your day to day finances. Even small things like a coffee or a lunch out here and there can add up over time. Start small and put away a few dollars each day, it’ll be empowering when you start to see the benefits.
Consider a 529 Plan
529 plans are college savings accounts that are available in all 50 states. The minimum balance to open an account is only $25, and you can put away money whenever possible to invest in your child’s future. The plans are tax-advantaged and anyone can contribute—so friends and family who feel generous can throw a few bucks in to celebrate a birthday or other milestone.
Consider a Flexible Spending Plan for Healthcare Expenses
Flexible spending plans allow you to put a little money aside each month, or each pay period and come with pre-tax savings as a further incentive. These plans supplement your insurance, and cover things like hospital visits, copays, eye exams or other services, though the specifics vary depending on your plan. There are also some limits as to how much you or your partner can contribute. Check healthcare.gov for more specifics.
Get a Handle on Your Debts
Hopefully, you’ve gotten a chance to pay down your debts. Ditch your credit cards and learn to consolidate your loans. While in an ideal world, we’d all be starting a family without any debt weighing us down. Consider that you may need to lower your payments to fit your child into your budget.
Get Life Insurance
Few things are less pleasant to think about than planning what happens after your death, but as a new parent, you want to prepare for the absolute worst. If you are the family breadwinner, you’ll need to purchase life insurance and name your child as the beneficiary. You’ll also want to figure out when your child or partner would inherit the money after your death.
Communicate with Your Partner
This is a big one. If you are raising your kids with a partner, you’ll need to get on the same page regarding spending priorities. Even if you have separate accounts, planning a monthly budget regarding child raising costs is a critical element to your financial success and the success of your relationship.