Welcoming a new baby is a joyous and exciting time for parents. Whether this is your first child or your third, you know this new addition will come with extra expenses. For most, navigating these costs while also continuing to save money can be tricky.
The good news is that you can take steps to keep your finances and budget on track while growing your family. Here are some tips to help manage your money with a new baby.
Pay down debts
If you are planning on having a baby, one of your first financial steps should be to pay down your current debts. The less debt you have when the baby arrives, the easier it will be to keep saving. While paying down all your outstanding balances before having a baby may not be possible, you’ll want to focus on those costing you the most. Start with your highest interest rate debts, such as credit card balances. This tactic will help decrease the amount you’re paying in interest and provide more room in your budget for new baby expenses.
Update your budget
You’ll want to spend some time adjusting your budget to account for expenses associated with your new baby. Begin by estimating what costs you will have, like diapers, formula, and doctor’s visits. Then, begin looking for areas you might be able to cut back. While you may not want to give up that Netflix account, you’ll probably be able to forego eating out as much.
Fund your emergency account
Unexpected expenses are bound to pop up. Being financially prepared for them can minimize their effect on your life. While you may not be able to add as much to your emergency fund as you did before the baby, it’s essential to continue to build it.
Putting your savings on autopilot with payroll deduction or automatic transfers is a great way to ensure you keep saving. These tools allow you to deposit a set amount to your emergency fund every time you get paid or on a chosen day each month. Also, if you receive any unexpected money, such as a bonus, consider adding a portion to your emergency fund. The more you can build this account, the better.
Start saving early
Time is your best friend when saving for your child’s future. In addition to college savings, start putting money aside for other expenses such as extracurricular activities, school supplies, or braces. These extra costs can add up quickly, so it’s important to have funds ready to use when the time comes. Plus, by preparing now, you’ll reap the benefits of compound interest.
Research college savings plans
While college may seem a long way off, the sooner you begin saving, the better. A 529 savings plan is a tax-advantaged option that can be used for college tuition, books, and other expenses. Remember, time is your best friend. Start early and let compound interest work in your favor.
Consider life insurance
Now’s the time to think about adding a life insurance policy if you don’t already have one in place. If you do have an existing policy, review it to see if any adjustments are needed to allocate for your growing family. While you can never predict the future, you can ensure your family is financially taken care of should something happen to you.
Create a will
A will is a legal document designed to express your wishes for properties and funds to be distributed following your death. While it’s never pleasant to think about, your will ensures your child is well-cared for financially and by a designated caregiver should something happen to you or your partner.
Continue saving for your retirement
If there is one thing certain in life, it is that time does not stop. While a baby brings a multitude of new expenses, it is important to continue saving for retirement. After all, once your child leaves the nest, you’ll want to ensure you can fund your golden years and not rely on your children financially. Even if you have to reduce your retirement savings initially, make it a priority to get it back up to speed as soon as possible. Remember, you can always help your child(ren) with student loans – you cannot finance your retirement.
We’re here to help!
While bringing a new baby into the world is exciting, many new costs come with being a parent. Taking steps now to prepare for these additional expenses will help ensure your finances remain aligned with your goals.
If you have questions about saving and budgeting or are interested in finding ways to reduce your current debt, we’re ready to help. Please stop by any of our convenient branch locations, call 1-877-TRUMARK, or click here to open an account.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.
