Bringing your little bundle of joy home is one of the most exciting moments in your life. But that thrill of welcoming a new member to your family can be tinged with anxiety. Parenthood is tricky, and raising a child comes with startlingly high bills in budget.
Can you afford it all? Here are three things to consider while navigating the financial aspects of parenting.
Create a Detailed Budget
A detailed budget is the cornerstone of your financial success — with or without children. This spending plan lays out your expected expenses as a new parent, so you can understand what you need to earn.
Keep a close watch on all baby-related costs, like diapers, formula, and clothes. But don’t forget about other essentials like savings and utilities. Your budget should be realistic for all your needs to be effective. In other words, make sure you include all your regular and irregular expenses, both essential and non-essential when tracking your spending.
Building a budget from scratch takes work, and few parents have a lot of spare time to devote to their finances when they first bring a baby home. Thankfully, you can download budgeting apps to automate the process, so you get all the structure of a budget with very little work. You just have to sync your banking accounts with the app, and it will do the rest.
Build an Emergency Fund
As a new parent, everything about looking after your child is novel, but you can have some idea of what’s in your financial future: diapers, clothes, food, toys, doctor’s check-ups, and, one day, school supplies.
That said, some expenses can come out of the blue, like when you have to rush your 8-month-old to urgent care for a suspected ear infection.
When life is full of expensive twists and turns, building an emergency fund is crucial for your family’s security. Check out these tips for managing surprise expenses to help you understand what to expect and how to prepare for them.
While you won’t ever have a hyper-specific line in your budget labeled as the exact emergency of the moment (like your child’s ear infection) a general emergency fund is a catch-all for all these unexpected expenses.
Start small and contribute regularly to gradually build your emergency fund. Automate your savings by setting up automatic transfers, ensuring consistent progress toward your goal.
Think About Their Future
An emergency fund is perfect for short-term issues, but you and your child are in it for the long haul. Every day, you’ll see them change and grow, and before you know it, they’ll be ready to leave the family home.
Consider how you want to prepare for this future by exploring college funds. Start saving for their education by researching 529 plans or other investment vehicles that offer tax advantages.
You should also think about a future where you won’t be there to provide for your child. Look into life insurance, establish or update your will, and designate guardianship for your child.
As new parents, adopting these financial strategies will empower you to provide a stable and prosperous future for your family. By creating a detailed budget, building an emergency fund, and planning for the future, you can navigate the financial landscape of parenthood with confidence and peace of mind.