It’s no secret that having a child is expensive. In fact, the average cost of raising a child from birth to 18 is nearly $300,000. While it’s true there are a lot of financial needs to consider, by proactively planning, you can keep financial stress from crawling into your time of joy.
Whether you’re just starting out or expanding your family, here are some things to consider to proactively plan for your new baby:
Build a budget
- Adjust your spending to accommodate the additional expenses associated with a baby, such as diapers, formula, clothing, and toys.
- Evaluate your current lifestyle and make necessary adjustments to accommodate the needs of a growing family, such as moving to a larger home or purchasing a larger car, a.k.a. the minivan.
- Research childcare costs in your area and consider options like daycare, babysitting, and the possibility of staying home or relying on family members.
Review of your health plan
- Having a baby is considered a life-changing event, which gives you the opportunity to update your insurance plan. To ensure you have enough coverage, consider options such as health plans covered by your employer, individual health insurance, or government-sponsored programs.
- Be prepared for out-of-pocket costs such as deductibles, copays, and prescription medications.
- Check with your employer to see if they offer a Flexible Spending Account (FSA) that allows you to set aside pretax funds to help pay for out-of-pocket healthcare and dependent care costs.
Emergency fund and savings
- Build a substantial emergency fund to cover unexpected expenses related to the baby, such as medical bills or childcare costs.
- If you plan to save for your child’s college education, consider options like a 529 plan or custodial investment account. You can open these types of accounts after you have your child’s Social Security number.
Don’t ignore your retirement
It is important to continue to contribute to your retirement savings, even if it means temporarily reducing contributions. If you don’t have an employer-sponsored plan, then take money that you would invest and open your own IRA or Roth IRA.
Everyone’s situation is unique, so it’s important to make sure you find the right plan that works within your budget and with your family. Consult with your Financial Advisor to help ensure you and your child are set up for financial success now and throughout the years.
Julia Carlson is the Founder and CEO of Financial Freedom Wealth Management Group, and a registered representative with LPL Financial. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.
Information in this material is for general information only and not intended as investment, tax, or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.
