Your New Baby Will Cost More Than You Imagined. Here are 5 Ways to Save
The parenting books tell when you can expect your baby to reach physical milestones. The parenting classes teach you the proper way to bathe an infant and change a diaper.
But new parents, who are projected to spend an average of $233,610 from birth through age 17, are often clueless and unprepared when it comes to how to manage their financial lives after having a baby.
Laura Adams, host of the “Money Girl” podcast, sat down with Andrea Woroch, an expert on how consumers can save money, to discuss common money mistakes new parents make. Woroch also draws advice from her experience as a mom to a 2-year-old, with another baby on the way.
5 Financial Mistakes New Parents Make
“Having a baby is certainly a joyous time, but it can also be an emotionally and financially stressful time,” Adams says.
If you’re planning a family, learn from these new-parent money blunders so you’ll start your family off on a better footing.
Mistake No. 1: Not Building Savings
Having a baby comes with a lot of responsibility — and a lot of new expenses. It’s important to build up a savings buffer.
You may lose out on earning income if you or your partner takes time away from work after the baby arrives. On top of that, there are additional costs each month, like higher health insurance premiums and all the unexpected things that crop up, like ordering takeout on those days when you’re just too exhausted to cook.
When you plan to have kids, it’s smart to stash money in a high-yield online savings account. Also look into ways to cut costs, like lowering your monthly grocery bill.
Mistake No. 2: Not Preparing for Child Care Costs
Child care tends to be one of the most expensive recurring costs parents face in the first few years. However, a recent survey conducted by The Penny Hoarder showed about 85% of parents surveyed did not save up for child care costs before having a baby.
Doing research ahead of time can help parents know what to expect. There are also ways to cut costs, like finding more affordable care options or trading free babysitting with friends who have kids.
Mistake No. 3: Not Getting Life Insurance
Celebrating a new life isn’t usually the time when you think about end-of-life preparations. But buying life insurance is a smart money move when you have a little one who depends on you.
It’s good to have coverage for at least six to eight times your annual salary, but you should have life insurance even if you’re currently a stay-at-home parent.
Mistake No 4: Overspending on Baby Gear
It’s tempting to buy all those cute little baby clothes, snuggly toys and that vibrating rocker everyone swears you’re going to need, but infants can get by without all the extras.
Save money by clearly defining your needs and wants. Utilize hand-me-downs and buy gently used gear instead of paying top dollar for new stuff your kid will outgrow in a matter of months.
Mistake No. 5: Not Saving for College Early Enough
The magic of compound interest lies in saving early. It might seem odd to save for college when your little one’s still in diapers, but it’s the best way to optimize your college savings.
A 529 college savings plan is a great vehicle to get funds together for your child’s future education. You can even ask friends and family to contribute in lieu of birthday or holiday gifts.
Listen to the podcast for more advice on handling finances as a new parent.
Nicole Dow is a senior writer at The Penny Hoarder. She is the mother of a 4-year-old and has made nearly ALL the money mistakes as a new parent.