Expecting? Prepare With These Money Tips From Parents Who’ve Been There

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For many, raising a child is an invaluable experience, one they wouldn’t trade.

However invaluable the experience, there is an unignorable price tag — a hefty one — that comes with caring for a dependent human.

Whether you’re single or married, birthing or adopting, planning ahead or flying by the seat of your pants, it’s important to make some smart financial moves before taking on the responsibility of a parent.

7 Smart Money Moves to Make Before Having a Child

Whatever the situation, you probably have a lot on your mind. The last thing you want to think about is money.

But you need to, and we’re here to help.

Here’s a checklist of some financial considerations you’ll want to make if you plan to have kids.

1. Consider the True Costs of a Tiny Human

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Hold on to your baby bonnets.

A family with a household income of $40,000 is likely to spend something like $21,000 before their child’s first birthday, according to a 2017 NerdWallet analysis. This number doesn’t include life insurance or college savings.

Many parents said they grossly underestimated this expense, citing diapers and wipes as the costliest expense. While those are costly, full-time child care proves highest, costing about $8,000 a year, on average.

For some, the solution is giving up their careers and becoming stay-at-home parents. If this is the best course of action, you’ll need to consider the effect on your household income.

Scott and Jennifer Perry of Raleigh, North Carolina, have a 15-month-old son, Isaiah. Scott Perry works as a full-time project manager and part-time blogger at the baseball and softball site Catcher’s Home. Before starting their family, Jennifer Perry was a full-time physical therapist.

When Isaiah came, she scaled back to working part time to help cut daycare costs.

“We were no longer earning what we had been, and now these huge costs were coming our way (medical bills and day care),” Scott Perry writes in an email. “It was all a bit overwhelming — especially combined with our lack of sleep the first six months.”

What You Can Do to Prepare

“It’s about more than just diapers and baby food,” Leslie Tayne, the head debt-resolution attorney and managing director at Tayne Law Group, writes in an email. She has more than a decade of experience helping individuals, families and businesses get out of debt. “Make sure to consider expenses now and in the future, such as daycare, toys, clothes, medical costs, after-school activities, school supplies, larger grocery bills, birthdays and a host of other things.”

Start by doing research. Read parenting books, magazines and blogs. Tap into other people’s experiences and learn what real-life parenting looks like — and costs.

No two experiences will be the same, but calculate some rough (realistic!) numbers. Map these out in a budget. It won’t be perfect, and your baby’s needs will change from month to month, year to year; however, this will at least give you a good idea of what to expect.

2. Acknowledge Your Debt

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Chances are, you have some form of debt — maybe a car loan, a mortgage or lingering student loans.

“That’s OK!” Tayne says. “As long as it’s manageable, it’s OK to have kids and debt.”

She warns, though, you’ll want to make sure you can keep up with payments even with a child in the picture. If you can’t, that’s when those scary spirals of high interest rates and late fees can stack up against you.

What You Can Do to Prepare

The first step is to get a good big-picture view of your different debts.

If you’re not sure how to do this, try using the free credit-monitoring service Credit Sesame.

With Credit Sesame, you’ll be able to get a clear picture of which debts are lingering. Chances are, you can’t pay those off immediately. Again, that’s OK. Just draw these payments into your budget to make sure you don't fall behind.

To find out what you owe where, create a free Credit Sesame account. On the dashboard, click “View Details” under “My Debt Analysis.” There, you’ll have access to your credit card debt, home loans, auto loans, student loans and other loans.

Another good tip for parents-to-be: Make sure your finances are protected. Credit Sesame offers free identity theft protection, too. This includes $50,000 in identity theft insurance.

3. Ramp up Your Savings

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Plain and simple: You’re going to need money, so you should start saving as soon as possible.

This is the primary money move Scott and Jennifer Perry focused on in the nine months leading up to their son’s birth. He stashed extra cash in an online savings account, which earned him interest.

Even in their gallant effort, Scott Perry wishes he’d started in on this task sooner.

“I knew ahead of time that hospital costs would be incredibly high, and I wanted to be prepared for that,” he says. “I was — and still am, thinking back on it — astounded to have received multiple hundred-dollar bills from the hospital even many months after our son was born.”

This doesn’t even include the cost of multiple pediatric visits they made within the first six months of their son’s life. Or the child care costs. Or the diapers. Or the wipes. Or all the other baby essentials.

What You Can Do to Prepare

Start tucking away money as soon as possible.

Tayne recommends striking up an emergency fund if you haven’t already. Take a look at your budget and see what you can spare each month. Dump it into a seperate, hands-off-unless-there’s-an-emergency account.

If you’re not sure how much you can afford to save at this point, try a savings app called Digit.

Digit automates the savings process for you and even determines the amount of money you can afford to save (without causing you to overdraft!) in an FDIC-insured savings account.

You’ll connect the app to your checking account, then Digit takes a look at your income and spending. Its algorithms do the rest.

The set-it-and-forget-it strategy helped Penny Hoarder Matt WIley save $4,300 without noticing. He’s used that savings to pay for unexpected vet bills for his fur babies, wedding expenses and a recent move from Florida to New York City. You can read his Digit review here.

When you’re thinking about everything but saving money, Digit will still have your back.

4. Address the Insurance Question(s)

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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 started thinking about life insurance.

“I decided it was time once we brought a little guy into this world,” Scott Perry says. “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.”

He admits researching life insurance was overwhelming.

“It took a lot of time and energy to figure this out and to make a choice based on what would be best for us and our situation,” he says.

In addition to life insurance, there are other types of insurance to consider, too: auto, homeowners, health and disability — just to name a few.

What You Can Do to Prepare

The world of insurance is intimidating for many, but start by looking into your own health insurance to see what it covers (ahem, childbirth is expensive).

“You’ll want to make sure you understand what is and isn’t covered for hospital costs during delivery (and the possibility of unforeseen medical emergencies or conditions affecting you or your baby),” Tayne says.

Then research other types of insurance you might want or need.

A company like Policygenius offers you an easy way for anyone to compare and buy life insurance. The search engine allows you to compare policies and get instant quotes. Once you find the right fit, you can apply right online.

If you’re young and mostly healthy, consider purchasing term life insurance online from Ethos. It partners with a major A-rated life insurance carrier to provide policies for a low price. For example, $30 a month could get your family $1 million of coverage.

Anyone, including independent contractors, can secure term life insurance through Ethos without a medical exam or extensive paperwork; just fill out a digital application.

For all other types of insurance, we put together a guide to 12 types of insurance — and how to determine whether they’re worth the cost.

Each situation will be different, so carefully consider your needs.

5. Don’t Forget About Your Retirement Plan

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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 says.

Luckily Scott and Jennifer Perry haven’t been as concerned with this, thanks to their 401(k) and Roth IRA accounts. Thanks to living frugally and a steady increase in their incomes, they’ve been able to increase the amount they’re contributing — even after bringing a child into the picture.

What You Can Do to Prepare

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 says.

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.

You should also keep tabs on your account to make sure it has your best interests in mind (you know, the whole stocks versus bonds thing and fees).

If you take a look at your account and can’t figure out what the heck is going on, consider using Blooom.

Blooom is a robo-adviser for retirement accounts. It offers a free 401(k) checkup so you can check your account’s pulse. If you don’t like what you see, you can opt to pay $10 a month to have Blooom monitor your account and automatically make adjustments that are in your best interest.

6. Write Your Will

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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.

What exactly is a will?

“A will determines who receives your assets and who will be appointed the sole caregiver of your children [if you die],” Tayne says.

Scott Perry says before he had his son, he didn’t have a will. Now he does, though it’s still on his wife’s to-do list. (We feel ya!)

What You Can Do to Prepare

Before hopping online and printing out some template and playing Mad Libs, work your way through our guide on how to write a will.

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.

7. Plan for Your Kid’s Future

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Although your child’s education isn’t something you need to prioritize immediately, it is worth considering.

But if you’re struggling in other areas, this is something that’s OK to put off.

“It’s important you don’t sacrifice your retirement or emergency fund to pay for college, so if this is not something you can start saving for right away, make a plan to start incorporating college fund contributions down the road,” Tayne says.

Scott Perry says they started a 529 savings account after Isaiah was born, but it’s something he wishes he’d at least acknowledged beforehand.

What You Can Do to Prepare

If you want to start a college savings account for your kid, you can look into a 529 plan.

A 529 plan is similar to a 401(k). Basically, it’s an investment account with tax benefits. This helps you save more money toward the goal: college.

Do your research to make sure this account is the right fit for your needs. Start by reading our guide to 529 plans.

The Bottom Line? You’ve Got This

Good news: If you’ve made it to the end of this guide, you’re already on the right track.

Sure, there are probably 100 million other things to worry about when bringing a kid into the picture (don’t forget how it’ll change the way you file taxes!), but if you follow this guide, you’re well on your way, financially.

Carson Kohler ([email protected]) is a staff writer at The Penny Hoarder. After researching and writing this article, she realizes she has a ways to go until she’s ready to care for anything other than a cat.

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