Family finances

7 Financial Moves Every New Parent Should Make

According to government statistics, a total of 251,551 babies were born from mothers between the ages of 20-25 in 2018. This number isn’t as staggering compared to the US, where a baby is born every 8 seconds.

As an expectant parent, this begs the question: how prepared are you to take care of your baby. With the cost of housing, food, and childcare/education being the most tasking on parents, a family is estimated to spend sums from $176,550-$407,820 depending on the income cluster.

It’s an elating feeling to hold the fruit of your womb, and you’d literally carry the world on your shoulders to offer the best for your infant.

Right?

We will look at financial moves that will ensure you give the best for your kid and enjoy his upbringing.

7 Smart Financial Moves New Parents Should Make

7 Stress-Free Financial Moves Every New Parent Should Capitalize

Child mortality has been a major concern, especially the first four weeks after childbirth. The child has 15 times the risk of death during this period. The World Health Organization stresses that skilled care will significantly increase the child’s survival rate.

How then do you prepare for this fantastic journey;

  1. Budgeting

Creating a household budgeting before the baby’s arrival ensures that you’re on top of the financial demand associated with the child. The estimated child-rearing yearly expenses are between $12,800-$14,970. The varying factor is the age of the child.

It’s prudent to note the recurring expenses like toys, diapers, and other unexpected medical expenses. You’ll have to make financial decisions towards saving more by cutting down on unnecessary expenses like going out and cutting cable costs.

You and your partner should work this out by setting financial family goals that you’ll stick with relentlessly. Leveraging the financial and budgeting apps will be an excellent way to ensure that you stay on track with your budget.

  1. Emergency Fund

Another way of pulling this off is by setting aside emergency funds in case of any eventuality. A 3-month or a six-month emergency fund is ideal for a double income and single-income household, respectively.

The amount of funds you save up on your emergency is dictated by the stability of your income and your monthly expenses. However, you should know that the funds you save should cater to your monthly spending and maintain your lifestyle.

The gloomy reality of the American saving culture leaves nothing to be desired, with 70% of the population having less than $1000 savings while 45% having $0 in their account. You’ll need a high level of discipline to achieve your emergency saving target.

  1. Insurance Cover

From health, disability to life cover are key policies you should have for you and your family. If the unfortunate thing happens and you or your spouse may be left to care for your child, it may cause a lot of financial constraints.

Taking a policy that covers your kid’s entire life or college fees would be ideal–the rule of the thumb is taking up a cover 15-25 times your income. You can also buy health insurance to pay for delivery charges, and you can also add your baby one month after s/he is born. A Health savings account would also suffice.

Disability insurance is one of the critical covers that’s often neglected. The rising number of accidents and statistics that indicate a third of the population over 20 years with the likelihood of getting disabled before retirement age should be a cause for concern among parents.

Family budget

  1. College Saving

The average college cost per year for a 4-year institution is between $25,015-$35,720; with a 6.8% annual growth rate, tuition college fees may reach $152,723 in the next 18 years. Though there may be several funding methods you could capitalize on to pay for your kid’s varsity education–starting early to save can ease off the financial burden.

There are several tax incentives plans offered by all 50 states geared towards encouraging education savings by leveraging on the 529 plans. The 529 plan comes in two types: the education savings plans and prepaid tuition plans.

You can also opt to open a college savings account that can earn you a 6% return; this can boost your kid’s college fund equally.

  1. Financial Priority

While setting your financial goals, it’s crucial to list your priorities first and ensure you don’t make major financial moves before your kid’s birth. At this juncture, most expectant parents will be scouring for a new home to accommodate the little one.

Or others may be thinking it’s about time to enhance their academic qualification to ensure a sustainable future for the child. While all these are positive and recommended financial moves, financial planners advocate for parents to halt these major changes, at least for a few years.

Making a significant financial move may overstretch you while at this moment, you want to have enough financial muscle to cater for any unexpected or arising expenses. As an expectant parent, having a chat with other parents can be an eye-opener on what you’ve overlooked and should be prioritized.

  1. Automate Your Budget

Taking care of your baby can be exhausting, with the night wailing, trying to navigate and understand what each cry means, is the kid hungry, is it time to change the diaper, or is the kid unwell?

The anxiety about caring for a kid can make you forget to watch for your bills, so it’s prudent to install a financial and budgeting app that will either send you reminders or automatically make your payments.

The financial app also comes in handy to make automatic savings–the ongoing unplanned expenses brought by the baby may thwart you off your saving plan. It’s therefore vital that you don’t shelve your financial goals but rather remain consistent for future financial freedom.

  1. Debt-Free

Debts cause a dent in one’s finances, more so having to care for your kid–every penny counts in this situation. The high interest incurred in debt repayment can be a drag in trying to facilitate your kid with what s/he needs.

You’ll have to live within your means and get out of this rat by adjusting your budget and do away with debts as soon as possible or at least a couple of months before you welcome your bouncing baby.

Taking advantage of a 0% balance credit transfer offers that will see you cut off on repaying high-interest rates. Leveraging the annual percentage rate introductory offer, which may go up to 21 months, will save you a couple of bucks that you can channel to your kid’s expenses.line break

About The Author

Naomi Olson [Website Twitter • Headshot]

I am a CFP® (Certified Financial Planner).

I have a severe phobia of bridges and dirty balance sheets.

Hobbies: blogging, meditation, and loving Bull Market (my dog).

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References:

  • Africa, S. (2019) More than 1 million births registered in 2018 | Statistics South Africa , Statssa.gov.za. Available at: http://www.statssa.gov.za/?p=12586 (Accessed: 15 July 2021).
  • Number of people born in the United States today as of Thursday, July 15, 2021 at 3:28:48 AM (2021). Available at: https://www.indexmundi.com/clocks/indicator/births/united-states (Accessed: 15 July 2021).
  • Parents Projected to Spend $245,340 to Raise a Child Born in 2013, According to USDA Report (2021). Available at: https://www.usda.gov/media/press-releases/2014/08/18/parents-projected-spend-245340-raise-child-born-2013-according-usda (Accessed: 15 July 2021)
  • The Cost of Raising a Child (2021). Available at: https://www.usda.gov/media/blog/2017/01/13/cost-raising-child (Accessed: 15 July 2021).
  • WHO | Newborn death and illness (2021). Available at: https://www.who.int/pmnch/media/press_materials/fs/fs_newborndealth_illness/en/ (Accessed: 15 July 2021).
  • Anon (2021) Gobankingrates.com. Available at: https://www.gobankingrates.com/saving-money/savings-advice/americans-have-less-than-1000-in-savings/ (Accessed: 15 July 2021).
  • Disability Statistics; Chance of Becoming Disabled – DisabilityCanHappen.org (2021). Available at: https://disabilitycanhappen.org/disability-statistic/ (Accessed: 15 July 2021).
  • Average Cost of College & Tuition (2021). Available at: https://educationdata.org/average-cost-of-college (Accessed: 15 July 2021).
  • SEC.gov | An Introduction to 529 Plans (2021). Available at: https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html (Accessed: 15 July 2021).
  • What Is Purchase APR and How Does It Work? | Credit Karma (2018). Available at: https://www.creditkarma.com/credit-cards/i/what-is-purchase-apr (Accessed: 16 July 2021).

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