Financial Musts for New Parents

Thursday, 31 August 2017

I am honoured to host this guest post by Patty, the Founder of Working Mother Life. She is totally fab - you must check her out! Over to you, Patty!

Financial Musts For New Parents

By Patty Moore

Somewhere between excitement and anxiety, first-time parents need to start thinking about making the right financial moves for their expanding family.  Having a baby is perhaps the biggest game-changer in anyone’s life and planning for a new family member takes time and money. 

For starters, expectant parents need to consider their budgets, start a savings account, look into life insurance, research estate planning, and then start considering retirement necessities, and that’s only the beginning. Let’s start by discussing a budget. 

Budgeting For A Baby

In order to properly prepare a future budget for a baby, it’s important to go through your current expenses to see what can stay and what needs to go. Obvious necessities will include a mortgage or rent, utility bills, memberships and then varying bills like gas and groceries. 

By examining past bank statements, you should be able to determine the differences between your needs and wants. If your budget is limited, those trips out to eat or fun grocery items may need to be cut back for diapers and other baby necessities. Memberships and cable bills may also need to be reduced for baby items.

Options like Sling TV or discount cell phone bills are becoming more viable than standardized bills, which can mean hundreds of dollars each month. Start by eliminating the non-necessities and then reduce whatever is left.

Once you know your real budget, then it’s time to start planning for those regularly baby items like daycare, food, and formula, but also for one-time expenses like a stroller or car seat. Don’t expect to get everything at a baby shower. Instead, start your own baby savings fund to prepare for the unexpected. 

Life Insurance Plans

For newborns, there are various life insurance policies that vary between term life and cash value options. Prices are also going to vary but it’s important for even the most fiscal parents to consider affordable term life insurance for their family to make sure that at least basic needs are covered if something horrible happens. 

Above all else, the main reason to get life insurance is to make sure your family is prepared when an unexpected event does happen. This way, your spouse and child will be prepared if the worst does happen.

Preparing a College Plan

Many parents today may be considering a college savings plan for their newborn, when they haven’t even paid off their own loans yet. In the United States, the costs of high education have risen, and are projected to continue rising. Higher costs have forced more and more families to rely on student debt. Increasingly, financial aid awards are not keeping up with the costs and families are forced to resort to costly student debt. You should work to prioritize future education plans for your child. The earlier you start, the more you will be able to save and the less debt your child my need to take.

According to Time, “If you open up a 529 account for your child, you retain complete control of the money.” With a 529 account, parents can save money tax-free for the pursuit of higher education. By creating a savings plan for college early, parents won’t have to worry about using their own retirement funds.

Estate Planning and Retirement

In addition to life insurance plans, estate planning and retirement are also vital for new families. An estate planning attorney can help your family figure out who the guardian may be if both parents were to unexpectedly pass away. This could also include a will, power of attorney, living trust, and various other options.

Once those basics are set up, it’s time to start really thinking about retirement. After all, if you prepare your child for everything and pay for their college but then can’t afford your own retirement, you’ll be working your entire life and making your child worry about your well-being.

The expenses for a newborn can add up but you and your spouse are going to need to keep up your current financial plans and investments for retirement. After all, the best way to take care of your child is to take care of yourself. Be an example and show your kids how to prepare for their future by preparing for your own. 

Where to Begin Baby Plans

Even if you’re still in the first trimester, it’s important to start saving and planning for the future. This starts by creating a realistic budget and then saving extra in order to make future payments and prepare for the unexpected. 

Once you’ve discovered your budget, it’s time to start thinking about things like a college savings plan, life insurance, estate planning with wills, and then your own retirement so you can lead by example. 

If all of this sounds a little overwhelming, that’s certainly a normal reaction. Take it all one-step at a time and plan to regroup every few months to make sure you’re not missing anything so you and your family will always be prepared for the unexpected. 

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