A new member of the family means a lot of things, from new experiences and memories to new fears and frustrations, chief among them the fact that you now have to stretch your money to completely support a new person.
Budgeting for a family is no small chore, especially if you’ve never had to do it before. It doesn’t have to be difficult or intimidating, though. By following these 5 money tips for new parents, you can get your new family’s finances off to a solid start in no time.
Establish An Emergency Fund ASAP
You’re probably concerned enough with just covering the day to day expenses when it comes to your new family member. Savings, beyond what you may or may not have automated, might not seem like a primary concern from the beginning.
It should be, though. It’s recommended that you have six months’ worth of non-discretionary income set aside to make ends meet should something happen to your earning ability. It’s not always fun to think about losing your job when you have a new baby, but it does happen, and if it does, your family needs to be ready.
Try to have enough to cover half a year’s worth of basic living expenses, including rent or mortgages, utilities, bill payments, food, and baby expenses such as diapers and new clothes, set aside in advance. Whether you’re getting this set up before baby comes or you’re starting after the fact, worry about this before you start worrying about college funds or pre-school tuition. Those things are important, but so is your family’s living security.
While you’re at it, take a look at life insurance. It may have been frivolous when it was just you or just the two of you, but now that someone is going to be depending on your income for several years to come, life insurance is an important security measure to make sure that your child is cared for in tough times.
Evaluate Your Primary Expenses
Next on our list of top 5 tips for new parents is to take a look at how much you’re spending on the necessities.
You know that adding a new person into your family budget is going to change things, but have you truly considered by how much? Remember, you’re not just going to need to buy one wardrobe’s worth of baby clothes that will last until they reach their toddler years, you’re going to need to re-outfit that growing body every couple of months.
There’s no one number that’s going to tell you how much extra your kid is going to cost you, and you’re going to have to be prepared for your budget to not go exactly as planned, but it’s important to look into the potential cost of raising your child, and evaluate your budget from there. There are even a number of online calculators to help you get started.
When you know how much you need for your child, you’ll be in a better place to decide how the rest of your budget should be allocated. Necessities like food, shelter, utilities, etc., aren’t going anywhere, but you’ll be surprised where you’ll be able to cut back.
Look Into Alternative Options
Once you know where you absolutely must spend and where you can cut costs, don’t be afraid to look into alternatives where costs are still high.
New parents are easy targets for advertisers because your time and mental resources are already pretty tight, but the newest or flashiest isn’t always going to be what you need. Buying gently used on things like furniture and clothes for your new kid is a good way to cut some of the initial costs that are only going to last between a few months and a couple years.
Look into alternatives for things like health insurance, too. Increased premiums might make employer benefits a costly addition to your budget. Government-backed coverage might save you some cash while still keeping your whole family healthy. If you do run into emergencies with your budget, there are options such as collateral loans that you can look into.
Look Into Tax Advantage College Savings
You might need that safety net first, but saving for college should be something that starts early. With estimated costs at a quarter of a million dollars by 2030, college isn’t going to come cheap and it’s not going to happen on its own.
Options like a 529 College Savings Plan provide parents a chance to save without the savings being subject to federal and in most cases state taxes, meaning that you’re getting a full dollar for every dollar you put in.
Don’t Hesitate To Ask For Help
When you’re tired, stressed, or just don’t know what to do, loading up on hundreds of dollars’ worth of baby books and paying for top notch sitters and nannies won’t get you nearly as far as your own network.
Don’t be afraid to ask for help from your supporters, whether that’s other new parents, your own parents, or other friends and family. If you need a sitter or help getting your kid to an important appointment, talk to someone you trust with your kids. Often, they’ll do it for nothing more than the promise that you’ll return the favor down the road.
Don’t be afraid to ask for advice, either. Things like medical needs should never be overlooked but a seasoned parent might be able to reassure you that a red spot is nothing more than diaper rash and save you the cost of a copay that you didn’t account for. Remember, it takes a village.
There’s no set number when it comes to budgeting for a growing family, and there’s no definitively right way to do it. Just set your priorities, look at all your options, and don’t be afraid to take help where you can get it. Most of all – don’t be afraid to not be afraid. You’re going to be a great parent.