Are you a new or expecting parent looking for some finance tips to help start you off on the right foot? Well, you’ve come to the right place! First, we’d like to say congratulations! Having your first child is exciting, but we also understand that the unknown can be scary. According to the USDA, it is estimated that total expenses for children from birth to age 17 for a middle-income American family are about $233,610. This is why we have put together four finance tips for new parents to help you feel more confident about your money.
Build Your Emergency Fund
Standard financial practice is to build an emergency fund that covers 3–6 months of your expenses. The goal is to protect you and your loved ones from any emergencies that should arise. This fund is only to be used for emergency purposes; not for everyday expenses or paying down debt. Some ways that you could build your emergency fund are to request cash in addition to baby-shower gifts or add tax refunds, birthday or holiday cash gifts, or other small windfalls to your fund.
Make a Parental Leave Plan
As you prepare to have your child, a really important financial tip for new parents is to look into time off. If you are working, does your organization provide paid time off (PTO) or do you plan on utilizing the Family and Medical Leave Act (FMLA)? For the spouse not having the child, does their work provide paid or unpaid parental leave? Connect with your Human Resources department to see what they offer!
In addition, something you need to consider is if you will go back to work or stay home after having your child. If you do plan to return back to work, will you have to pay for childcare? It’s also important to know that it is possible you could change your mind once the baby arrives. Decisions like these can really affect your household budget as you move forward.
Update Your Household Budget
Reviewing and updating your budget is always a great idea. However, when you add an additional person to your household budget, it’s a must! It’s important to do your research into how much everyday baby items will cost so you can be prepared financially. Although your needs and expenses will often change as your child grows, your budget should continue to focus on using your income to cover your expenses and debts while continuing to save. Here are a few things to think about:
- Medical Care – Budgeting for the delivery is definitely going to be the most expensive cost if you live in the United States. The average delivery is just over $11,000 and this can increase or decrease depending on what state you live in.
- Diapers – The National Diaper Bank Network states that your baby needs at least between 6 and 12 diapers each day. Parents.com informs us that, “The average diaper costs anywhere from $0.20 to $0.30. Assuming your baby uses 2,500–3,000 diapers in their first year of life, you can expect to spend about $500-$900 on an annual supply.”
- Feeding– Feeding costs for your new baby can vary based on your particular situation. Baby formula, in particular, comes in a variety of brands and types, and the cost can vary depending on what you choose. Powdered formula typically costs between $70 and $150 per month. While breastfeeding is essentially free, there are costs for supplies and storage that many new parents forget to include in their budget. Also, once you begin feeding your child solid food, you can expect to spend about $100 per month.
- Clothing – Should you decide to primarily buy brand new clothing for your child, experts estimate parents spend $600 annually, on average, for clothing. Please note that this number could increase or decrease depending on where you purchase the clothing from.
If you are interested in mitigating costs, ask your friends or family if they have gently used baby clothing, gear, toys, or other essentials you can borrow or purchase for a low cost.
Start Saving for College
It might sound crazy because thinking of your kid going to college seems so far away, but don’t wait! It’s good to start putting a little money away on a regular schedule and start as early as you can. A few different ways you can put money towards your child’s college fund is an ESA/Education IRA, 529 Plan, or UTMA/UGMA.
We also know that family and friends could be looking for ways to help out during this new season of life. Instead of another toy they don’t need, they could contribute to a savings account! Set up a savings goal in the NuMoola app for college, ask them to contribute and start saving for your child’s college fund.
Finance Tips for New Parents
As you review these finance tips for new parents, it’s important to note that every baby and family is different. Do what you can from the above tips to prepare for your family in advance and go from there! Our team is cheering you on during this new time for your growing family!