Expecting? Prepare With These 9 Money Tips From Parents Who’ve Been There
For many, raising a child is an invaluable experience, one they wouldn’t trade.
But there is a price tag — a hefty one — that comes with being responsible for caring for a tiny human.
Whether you’re single or married, birthing or adopting, planning years ahead or flying by the seat of your pants, use these simple tips to help you feel more financially prepared.
1. Plan for Your Kid’s Future
Your kid’s college savings fund is something that’s easy to put off. But here’s the thing: The sooner you start, the more you’ll save, especially if you use a 529 plan. Because it’s a tax-free investment account, it can grow your money a whole lot faster than a regular ol‘ savings account — how’s an extra $40,000 sound?
But unless you’re a financial adviser, 529 plans can be tough to navigate. Thankfully, the U-Nest app takes all the guesswork out of opening an account.
U-Nest matches you with the best college savings plan based on your needs, then it takes all of five minutes to set up an account. Plus, it only costs $3 a month. No complicated fee structures, no lengthy paperwork, no in-depth research required.
Better yet, because it’s a tax-free investment account, it could help you save $40,000 more than a savings account would if you saved $200 a month starting from when your child was born. Even if you started when they were 4, you could save an extra $20,000. (We used the U-Nest savings calculator for these estimates.)
Once your child is college-aged, the money can be used for college or trade-school tuition, housing, books and/or a new computer.
When saving $40,000 is this easy, why wouldn’t you do it? It takes five minutes to download the app and create an account, and you can start by saving as little as $25 a month.
2. Ramp Up Your Savings
Plain and simple: You’re going to need money, so you should start saving as soon as possible.
Leslie Tayne, the head debt-resolution attorney and managing director at Tayne Law Group, recommends expecting parents strike up an emergency fund if they haven’t already.
And here’s another thing: If you have a savings account, that’s awesome, but chances are you’re not earning much money from it.
These days, the average savings interest rate is limping along at a measly 0.08%, according to the FDIC. Deposit a hundred bucks, and you literally won’t earn a dime in a month’s time.
But with Credit Karma Savings, you’ll earn more than six times the national average.
And unlike other savings accounts, Credit Karma doesn’t make you jump through hoops to collect interest. As long as you have at least 1 cent in your account, you’re good to go. Best yet: No fees. The account is completely free.
It takes no more than a few minutes to open an account.
Pro tip: To set your savings goal, take note from Nora and Shane Martin of Palm Harbor, Florida. When they found out they were expecting, they created a spreadsheet of what they’d need for the baby, added up the expected costs and divided the total by six to develop a monthly savings goal for the next six months.
3. Address the Insurance Question(s)
Bringing a baby into the family means someone’s dependent on you — and that can be kind of terrifying.
Within a month of their son’s birth, Scott and Jennifer Perry of Raleigh, North Carolina, started thinking about life insurance.
“I decided it was time, once we brought a little guy into this world,” Scott Perry said. “Now, if one of us died, the other would be responsible for raising and providing all the care for the child, saving for his college, etc. It was the weight of responsibility that you feel once you have a kid.”
You’re probably thinking: I don’t have the time or money for that. But your application can take minutes — and you could leave your family up to $1 million with a company called Bestow.
Rates start at just $5 a month. The peace of mind knowing your family is taken care of is priceless.
If you’re under the age of 54 and want to get a fast life insurance quote without a medical exam or even getting up from the couch, get a free quote from Bestow.
4. Budget for Baby
Your budget is going to need a bit of an overhaul with your new addition.
The Martins thought they were a fairly frugal couple, but that was before they began tracking their spending prior to having their son. They realized they could bank some savings by cutting back on entertainment and meals out and by not spoiling their dogs so much.
To get on the right track financially, the Martins created a zero-based budget, accounting for every dollar that came in. They made room in that budget to pay down credit card debt so they didn’t have to worry about making payments once the baby arrived.
When you’ve got an infant on the way, you’ll need to plan for large expenses upfront — like birthing or adoption costs, a crib and a car seat — and you’ll need to adjust to the many recurring costs you’ll face each month — diapers, formula and child care, to name a few.
Keep in mind that if you or your partner plans to take extended time off work or become a stay-at-home parent, you should base your budget on what your expected income will be once the baby arrives. Practice living off one income in the months prior to the baby arriving and pocket the extra money as savings.
5. Prepare for Parental Leave
Babies come into the world needing tons of attention and care. Childbirth is also a significant medical event for a woman, requiring several weeks of recovery — whether it’s a Caesarian section or vaginal birth.
Having time off work to bond with your new baby, heal your body and adjust to the changes in your family is crucial.
Though the United States does not offer universal paid parental leave for new parents, the Family and Medical Leave Act allows for eligible employees to take up to 12 weeks of unpaid time off following the birth of a baby.
Your employer might offer a certain amount of paid time off, or you might be able to get a portion of your wages paid through short-term disability insurance. Some parents-to-be also save up paid vacation or sick days to use once the baby arrives.
Meet with your boss or your company’s human resources department to develop a plan for taking parental leave. If there are any lapses in your income during this time, try to save enough money during the pregnancy to hold you over.
6. Make a Decision About Child Care
Of all the new post-baby expenses, many working parents find child care to be the most expensive.
In a July 2018 Penny Hoarder survey of over 1,200 parents with children under the age of 6, 82% said they spent $500 or more each month on child care. Over half said they spent at least $750 a month. The majority of parents surveyed said child care was their biggest child-rearing cost, and most felt surprised and overwhelmed about the expense.
If you’re returning to work or school after having a baby, start researching affordable child care options early and look into child care assistance, if applicable.
Other parents make the decision to significantly reduce their hours or pause their careers and become stay-at-home parents.
When the Perrys had their son, Isaiah, Jennifer scaled back her hours from full time to part time to help cut day care costs.
“We were no longer earning what we had been, and now these huge costs were coming our way,” Scott Perry said. “It was all a bit overwhelming — especially combined with our lack of sleep the first six months.”
Whether you’re staying home due to preference or out of necessity, you need to consider the effect on your household income and make sure your budget reflects the change in income.
7. Acknowledge Your Debt
Chances are, you have some form of debt — maybe a car loan, a mortgage or lingering student loans.
“That’s OK!” Tayne said. “As long as it’s manageable, it’s OK to have kids and debt.”
She warns, however, that you’ll want to make sure you can keep up with payments even with a child in the picture. If you can’t, those scary spirals of high interest rates and late fees can stack up against you.
If you have credit card debt, one way to make your life easier is to consolidate it.
If you owe your credit card companies $50,000 or less, a website called AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.
The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.99% APR), you’ll get out of debt that much faster. Plus: No credit card payment this month.
AmOne won’t make you stand in line or call your bank, either. And if you’re worried you won’t qualify, it’s free to check online. It takes just two minutes, and it could help you pay off your debt years faster.
8. Write Your Will
This is something we hear from a lot of parents about wills: “Yeah, I know I should have one, it’s just…”
Writing up a will might seem like a daunting task, but it’s an essential one if you’ve got kids in the picture.
A will is a legal document that spells out who will receive your assets and who will be your child’s legal guardian if you die. It may be dismal to think about, but like life insurance, it’s important to prepare for this worst-case scenario.
Our guide on how to write a will can help you figure out how to tackle this process. It outlines everything you need to know, including the differences between a will and a trust, the cost of a will (yes, they cost money!) and how to write one if you’re running low on funds.
9. Don’t Forget About Your Retirement Plan
Having a little one to tend to doesn’t mean you should forget about your own future.
You’ll want to make sure your retirement fund is on the right track.
“Before having kids, it’s important you have a good start on your retirement fund and that you make a plan to continue to make contributions,” Tayne said.
If you’re having trouble getting money into your retirement account, build it into your budget. Tayne encourages you to consider it the same way you’d consider rent: essential.
“Pay it at the beginning of every month so you’re not tempted to spend it elsewhere,” she said.
If you have a retirement plan through your employer, see whether you can set up direct deposit so a portion of your paycheck is automatically siphoned out before you can get your hands on it.
Carson Kohler ([email protected]) is a staff writer at The Penny Hoarder. Senior writer Nicole Dow contributed to this article.