Top 5 Financial Moves for New Parents

Picture that moment you find out you are pregnant or have your first baby. A flood of emotions comes over you; excitement, fear, anxiety, and relief, sometimes all in the same day! What are you going to do? Are you really prepared for this? As much as anyone can say they are ready, it’s of my opinion that no one can be truly ready for what’s to come. I mean, think about it, you were just getting the hang of taking care of yourself, now you are responsible for another life! No pressure.

 

As with most other things in the life, money becomes an issue very quickly. Kids are expensive. According to the USDA in 2016, it currently averages about $245,000 to raise a child in the US. That’s not even considering if you want to help your child pay for college. That’s a shocking number! Now, my intention is not to cause you to panic, but rather be aware. Understanding what it takes is the first step to preparing. Where do you go from here? Let’s take a look at five tips to help ease your life as a new parent. My hope is you will be able to spend more time enjoying your kids and less time worrying how you are going to afford everything they need.

 

  1. Get organized!

I recently heard a story from a friend of mine that was traveling with her kids. Just the thought of trying to manage that can make a normal person anxious. She had everything ready to go, a new car seat and caddy, baby carrier, and backpack. Just when she thought everything would be smooth sailing at the airport, the car seat was broken and wouldn’t snap into the caddy. Now her hands are full and she’s struggling through the airport looking for help getting to her gate, feeling like breaking down the whole time. Life is crazy enough, throw a baby in the mix and everything becomes chaos. Worrying about your finances on top of this just makes things worse. Get organized with your bills, budget, and savings. Take advantage of websites like mint.com to keep track of where you are spending your money. Set up automatic bill-pays to make sure you don’t miss a bill payment. Take this one step further to set up automatic saving; if you don’t see it, you won’t miss it.

  1. Set Goals

 

Think about when you take a vacation, you don’t just jump in the car and go. We reserve hotels, map out our drive, and book activities. You should think about your family’s future in the same way. Would you like a bigger house for your growing family, the minivan (or SUV for you dads!), or trips to help your kids learn and grow? These are all goals, we just don’t always think about them in that way. We normally think about goals in terms of a sports team or our careers; how do we want to finish this season or where do you want to be with this company in five years. We have to have something to shoot for to base our progress on. It’s not always easy to think about goals in terms of your everyday life. Dream a little bit, talk about them out lout, and most importantly…..write them down! Set some realistic goals that can help you gain some momentum for a bigger stretch goal. It can be as simple as being able to buy your child their first car or something bigger like paying for college or a wedding.

 

  1. Start Early

 

Just like saving for retirement, saving for your child’s education is most effective when you start early. Take advantage of the time value of money. This is the exponential growth of your dollars over time. There are a lot of different ways to save for schooling, whether it is for a private high school or college. There are state programs like 529s that allow you to take advantage of tax credits, as matching grant and scholarship opportunities, protection from creditors and exemption from state financial aid calculations, all along with tax deferred growth. These also allow other friends and family to contribute as well. It makes for a great birthday or Christmas gift! Keep in mind you don’t have to use your state’s plan, you can pick from other states as well, but generally you will get the most benefits from your own state. Along with the 529, you can establish a UGMA/UTMA custodial account for minors that would take advantage of their lower tax brackets. A financial professional can help you decide which route is best for you and your family. These are just two examples of common tools.

 

  1. College or Retirement?

 

Not to negate the importance of tip number three, but the question of saving for you or your child first can be a difficult one. Everyone wants to help their kids have more opportunities than you did and maybe that means making sure they aren’t burdened with student loans later in life. On the other hand, you also don’t want to work until you’re eighty years old. It’s a difficult balancing act. We’ve seen in recent years, more parents taking from their retirement savings to help pay for their kids’ schooling. Most financial advisors would agree, this is a bad move. You need that money to live on down the road and as much as a college education is becoming the norm out there, it is still a luxury item. They may lower costs by earning a scholarship, staying at a great state school (ahem..Boiler up!) or even decide to take up a skilled trade instead. Pay yourself first.

 

  1. Ask for help

 

Kids are certainly a lot to handle. We’ve all heard the old saying, “it takes a village to raise a child.” You will need help along the way, so don’t be afraid to ask for it. Whether it is to pick the kids up from school or someone to watch them, so you can have a date night with your significant other, reach out to those around you. You don’t have a lot of time to enjoy your kids while they are young. Allow yourself more time to focus on your family and what is important by asking for professional financial help.

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