If you are expecting your first child, you may be worried about your financial future, and with good reason. Children are an expensive undertaking, with some studies showing the average cost of raising an infant all the way through high school to be over $230,000. With college tuition skyrocketing, home values fluctuating, and job security changing, it’s wise to start planning for the future now. Thankfully, with some common-sense steps, you can ensure a financially healthy future for your family.
Step 1: Know Your Money
The first step is to become better aware of your current financial status. Start by creating a budget. Calculate your net income and monthly expenditures, including mortgage, utilities, loans, and so forth. Deducting expenditures from income will let you know whether you need to cut back someplace, or if you can set aside more in savings. You may consider starting a college fund or saving for Junior’s first car, which is a great time to do so. You should also save for an emergency fund for expenses like home repairs, new appliances, deductibles, car repairs, and so forth.
While you’re at it, take stock of your assets and liabilities. Assets include things you own outright, and liabilities are debts. Assets include vehicles, vacation properties, and your house (you can determine your home’s value as easily as entering some information online). Together, your assets and liabilities determine your net worth.
Step 2: Plan a Soft Landing
Your monthly expenses are about to go up as you prepare for your little one. Not only do you need to prepare a nursery, but you should also consider medical expenses. You can use this calculator from BabyCenter.com to estimate your first-year baby costs. On top of all that, many families must pay childcare costs at the end of maternity leave or cover the loss of income if a spouse is staying home with the baby.
If money is tight, one idea is to look into freelance or side work. Consider a flexible side hustle that lends itself well to your new role of parenthood, such as pet sitting, catering, or being someone’s personal shopper. Pick something you enjoy so you look forward to it, which is not a stressful addition to your lifestyle.
Step 3: Evaluate Insurance
Make sure you have the best medical coverage for pregnancy, labor, and delivery, as well as your newborn’s health needs. Don’t forget to add your new baby to your health insurance after the birth. Some experts recommend adding a child to your policy within 30 or 60 days of birth, but check with your insurance company for specifics. Along those same lines, consider adding life insurance and disability policies if you don’t already have them. This way, your family is covered should the unthinkable happen.
This is also a great time to figure out ways to lower your auto insurance. Since having a baby costs a lot, finding ways to save money here and there is very important. For example, if you bundle your auto insurance with another policy, keep a clean driving record, or install an anti-theft device, some insurance companies will offer you lower rates. So, talk to your agent or, if needed, shop around for a new policy.
Step 4: Must-Have Paperwork
If you haven’t already done so, a will is a must-have for parenthood. It’s a chance to ensure your baby’s interests are met should anything happen to you. It’s also an opportunity to establish who raises your child in the event you aren’t able to do so. You may also want to establish a trust, which allows you to decide who manages an inheritance until your children come of age.
Step 5: Planning for the Future
Finally, wise parents will plan for their own retirements as well as their kids’ futures. In fact, Money Crashers recommends saving for your retirement before starting that college fund. If you aren’t sure of whether you’re on track for retirement, you can use a retirement calculator to give you more insight.
It’s normal to worry about things like finances when you have a child on the way, and it’s healthy to make changes with your baby in mind. It’s not too soon to start planning for the future. The more you do now, the more secure finances will be for you and your children.