Money Moves for New Parents - picture of pregnant belly with red and blue piggy banks held out

Preparing for Baby: 8 Money Moves for New Parents

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So, you’re going to be a parent?!? Congratulations! Preparing for a baby is one of the most exciting times in life. There is nothing like seeing your newborn child and holding it in your arms for the first time. It’s a feeling of complete and total love, something that’s simply too hard to explain. You’ll understand what I mean when the time comes.

Of course, once the reality of the new baby sets it, you might feel a sense of utter and complete panic. After we had our first child, I remember wondering how I was allowed to leave the hospital with her. At that point, I wasn’t even thinking about how I was going to teach her how to read, write, and become a good person. I was scared to death that I wouldn’t be able to keep this kid alive!

I didn’t have a clue what I was doing, but lo and behold it all worked out. It turns out, all she needed was love and affection…plus the occasional diaper change and 3 A.M. nightly feedings. I’m proud to report that both of my little girls have made it past their infant years, and I’m very proud of the young ladies they are becoming.

Financially Preparing for a Baby

Yes, a new baby is going to change your life in countless ways. Life is not all about you anymore. Everything you do affects them, and that goes for your financial decisions too. When preparing for baby, there are a number of money moves you can make to help get them started on the right financial foot from saving to easy ways to make extra money. Here’s our new parents’ guide to financially preparing for a baby.

Get on a Budget

One of the best things you can do for your new baby is to whip your own finances into shape. Kids learn how to handle money from their parents, and you can point them in the right direction by showing them how you budget. Besides that, children aren’t cheap. You’re going to need to save money where you can, and keeping a monthly budget helps you take control of your money. Here as some great tips on ways to make an extra $500 a month to help with your savings goals!

Pay Off Your Debt

If you’re like most Americans, you’ve probably got a little bit of debt lying around. Maybe you’ve got some credit card debt, some student loans, or perhaps you’ve already financed some new baby furniture (Please don’t do that!). Pay those suckers off as fast as possible – preferably before your new baby is born. Getting out of debt helps create wiggle room in your budget. Refinance it if you need to, but don’t take out any more. When you have fewer bills to pay, you can live life on your own terms. So, get that debt paid off ASAP!

Buy Health Insurance

Having health insurance is now the law of the land, so avoid the fine and get yourself covered. Even more importantly, your health insurance can help take care of the enormous hospital bills you’re going to have from the birth. Hopefully, there won’t be an complications, but the financial ramifications could ruin your financial situation for years. Additionally, you’ll want to make sure you have at least enough money saved up to meet your deductible. So, bust out your new budget and get to saving!

Purchase Term Life Insurance

When you’re young and single, it’s easy to put off getting life insurance. We all think we’re invincible, but as a former funeral director, let me tell you that s#it happens – and, unfortunately, it happens more than you’d think. Now that you’ve got a little human depending on you, it’s time to protect them. Look for a good term life insurance policy that will cover your funeral expenses and give your family money to live on. Term life insurance is a cheap way to protect your family from the loss of your income due to your death. We’re talking like $25 a month for $250,000 in coverage on a healthy 25-year-old male. Use the widget below to compare policies from a number of different companies. Seriously, just do it.

Get Yo’Self a Will

Now that you’ve snagged a good life insurance policy, it’s time to create a will. I want to be completely transparent with you here: Getting a will is something I put off for far too long. I mean, if I died, the last thing in the world I would want is the state deciding who gets my kids. Plus, I want to be clear about how my assets should be divided if I die (and how those assets should be used to help my children). The thing is, creating a will is pretty easy. You can even do it online. Personally, I used LegalZoom to make a will for both Holly and myself. Last wills start at about $69 apiece, and LegalZoom makes the entire process super simple. Just fill in the questionnaire, and you’ll be done in about 15 minutes. You can have your new will shipped to you in just a few days. Learn more by clicking on our affiliate link here.

Start a College Fund

Forget about elementary school! The minute your baby is born, it’s time to start thinking about college. Student loan debt is on the rise, and a big part of that is the failure to prepare financially. So, the earlier you start a college fund, the more time you’ll have for that money to grow. Since our home state provides great tax benefits, we use a 529 Plan. However, you can also use an Educational Savings Account (ESA), UGMA and UGTA accounts, or even a Roth IRA. Check out your options and get saving right away.

Invest for Retirement

Before you even think about investing in a college fund, you need to make sure that you’re funding your own retirement. There are plenty of ways for your children to fund a college education, but good luck finding somebody else to fund your retirement. That’s why it is über important that you pay yourself first. At the very least, you need to take advantage of any company match offered by your employer. (That’s free money, y’all!) If budget constraints force you to make a choice, always choose retirement over college.

Don’t Overspend on the Baby Products

When preparing for baby, it’s easy to get so excited that you end up overspending. Trust me, I know how tempting it can be to buy every single outfit in the store. I mean, those infant shoes are absolutely adorable. But, the thing is, your brand new bundle of joy really doesn’t need a Bellini Baby crib. Something cheaper, or even second hand, will do just fine. Try shopping Craigslist, Facebook swaps, and garage sales for baby clothes and furniture. You can even check out amazon and ebates for special offers. Your little one will grow so fast, it isn’t worth spending a fortune on their wardrobe or their bedroom furniture. Why spend $20 on a shirt when you can get it very lightly used for $1? Need more suggestions? Check out our post to learn how to save more money.

Preparing for Baby: Lead by Example

Becoming a parent is an absolutely awesome experience – one that you’ll never forget! It’s an incredible responsibility. Your child will depend on you for all of their needs, and they will learn through your example. By using these tips, financially preparing for baby should be a breeze. Get ahead of the game, and start teaching your child good money habits from Day 1. Good luck, and congratulations!

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20 Comments

  1. An excellent review of how to set yourself up financially. Your newborn baby doesn’t have pride issues. He/She won’t be embarrassed because they’re always wearing second hand clothes and sleep in a used crib and eats out of a second hand high chair! They’ll still be cute. I promise!

    1. Thanks Jordan! You’re right, your baby is going to look cute in anything 🙂

  2. While I don’t disagree about start saving for college, don’t forget about elementary school too. My daughter started Kindergarten last summer, and I remember lots of the parents at her preschool lamenting the fact that the elementary schools in their districts were not very good. Many of them had bought houses when their children were on the way or very small, but didn’t pay attention to the school zoning, Several of the parents felt like they needed to pay for private school or move as the kids entered elementary school.

    Since my mother in law had been a special resource teacher in our county for 30 years, she made us very aware as we were home shopping where the good schools were. We consciously made a choice to be between two very good elementary schools, figuring that even if the district lines moved a little we would be covered.

    1. Luckily, the schools in our area are some of the best in the state, but we kept had that in mind when we bought our house. When it comes to private schools, I have to admit that I’m just not a believer in spending that sort of money – especially when it comes to elementary or preschool. In most cases, I just don’t think you get a very good return on investment. Of course, every situation is different, and I know it can definitely depend on where you live.

  3. All excellent advice! I agree that parents need to put their retirement first. You can try to help your kids when college comes (or create a college fund once you’re doing well on the retirement fund front), but you have to take care of yourself. If nothing else convinces you, then realize you don’t want your kids to worry about/support you when you stop working. Especially since sometimes you stop working sooner than expected. Like you said, s#it happens.

    1. Yup, yup. You’ve always got to take care of yourself first. It’s hard to give when you’re broke…

  4. A will!!!! My best friend is pregnant and I keeping lecturing her that she and her husband need to get a will in order (preferably before the baby is born). Going through CFP classes is making me super paranoid about things like this. I don’t have dependents, but I also did a will through LegalZoom so that my money wouldn’t get tied up in probate court (I don’t want the gov deciding where things go!).

    1. Exactly. I have no desire to let the government decide how my estate should be handled…especially when it comes to my kids.

  5. Couldn\’t have said it better myself. Went through this with our first son, and realized we did most of it but we still haven\’t updated our wills while riding the whirlwind of first time parenthood. Now with baby #2 on the way, we\’re doubling down with the focus on finally updating our wills and increasing my life insurance.

    And definitely pay yourself first when it comes to retirement vs college fund. You don\’t want to be a drain on your children in your later years. And nothing will focus your child\’s financial vision faster than the realization a college degree isn\’t guaranteed, but something you have to work for, and not something to waste partying your way through.

  6. I feel like even if I wait 10 years to have a child I will still be freaking out about the financial aspect of it. Impossible to be “completely” ready from a finance standpoint. These are good tips to get started on the right foot.

    1. You can’t prepare for every eventuality, but you can definitely prepare for some.

  7. I couldn’t agree more with these suggestions. I actually found that we got our finances in order faster because of having children, and that’s freed us up to focus on the kids more.

    1. It’s crazy how motivated you become when somebody else is depending on you, right?

  8. Just had a baby myself. I’m not too fond of starting a college fund this early. There are too many other things that have a higher priority and being a first time dad has been pretty overwhelming so far. I feel like there’s too little time in the day. Loving every single minute of it though, even the sleepless hours and screaming diaper changes. Though I do have to say I’d like to get that “will” in order. That was something I never thought I’d had to do, but realized it’s actually pretty important to get that set up early on. Nice article Greg!

  9. The use of cloth diaper has helped us save much money instead of the typical diapers. My wife just introduce this to our baby as early as possible so that it can be less allergic to the skin of our baby.

  10. I am not a father yet, but looking at these 10. I think I gotta prepare for it in advance even though I haven’t had a partner yet. It’s really a daunting task actually.

    1. You know, it is a big responsibility…but don’t let it paralyze you. Having kids is awesome and you figure out a lot of things as you go 🙂

  11. Imagine if everyone reading this committed to paying off their debts now that they’re having a baby?! The effect would be unreal.

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