It’s no secret that raising a child is an expensive endeavor, which is one reason it’s important to prepare your finances to welcome a new baby. The last time the U.S. Department of Agriculture put out a report that calculated the average cost to raise a child to adulthood, it estimated that it would cost around $233,610 – and that was in 2015. If we adjust this estimation for inflation, then we can expect to spend around $272,049 to raise a child in 2022.
That’s a pretty significant chunk of money, especially considering all the other costs that go into having a family, such as financially supporting yourself (and possibly your partner), paying a mortgage or monthly rent, staying on top of bills, taking a vacation once in a while, and saving for the future – just to name a few. If you plan on having more than one child or you’re determined to help pay for your child’s college education, then it becomes even more imperative that you plan ahead to help ease your future financial stress.
If you are expecting, here are some steps you can take each trimester so that you and your family can feel more prepared as you get closer to the big day.
First Trimester: Solidify Your Family Budget
Whether you’re about to have your first child or you’re adding to an already growing family, chances are your household budget is going to require some serious changes as you prepare to welcome your newest member. Not only is the cost of labor and delivery high at around $4,500, but you’ll also want to take into consideration how much it’s going to cost to get all the essentials a newborn requires. You’ll need clothes, baby toys, a crib, a car seat, a stroller, not to mention diapers, baby food, daycare, doctor visits, and anything else your baby might need. You’ll also want to take into consideration any changes in employment status and pay for you and/or your partner if there are any.
Taken all together, it’s clear why setting a budget at the beginning of your pregnancy is such a good idea. You have nine months to cut back on any non-essential expenses and get your finances in order. Think about paying off any credit card debt you may be carrying, canceling subscriptions that are unnecessary, and cooking at home more often so that you’ll have more financial flexibility once your bundle of joy arrives.
Second Trimester: Update Your Estate Plan
Having a child is such an exciting time in your life that it can be hard to think about planning for a day when you or your partner might not be around to take care of the family you’re growing. However, taking the time to get your estate plan and Will documents in order now means you won’t have to worry about these things once your baby arrives. Start discussing with your partner whom you want to take care of your child should the unthinkable happen, and where you want your assets to go. Although you won’t be able to finalize anything until after your child is born, taking the time now to ensure that you have all your information and paperwork in order can provide peace of mind in the present and save you time in the future.
Additionally, you and your partner may want to consider purchasing life insurance. It may seem unnecessary now, but your rates will be lower the younger and healthier you are, meaning you’ll be able to afford more coverage to protect your kids should anything happen.
Third Trimester: Begin Investing in Your Future
For some parents, helping their children pay for college is an important goal to work towards. Now is a good time to get a plan in place and start saving if you’re looking to help your child with secondary education at all. A 529 account can be a great way to start putting money away for college expenses. 529 plans are great because they offer tax benefits on both the money deposited and withdrawn so long as the funds are used to pay for qualified education expenses. That could be anything from tuition, to textbooks, to repaying student loans.
SEE ALSO: Why You Need a Family Mission Statement
You have six months after opening a 529 account before you are required to assign a name and Social Security number to it, so taking care of opening the account now will save you time once your baby is born. If you’re unsure of what kind of investment or savings account to open for your child, you can simply start putting money aside that you can then deposit into the account of your choosing once you figure out what options are best for you.
Children are a wonderful gift – albeit an expensive one. As with any significant expense, the best way to make it work is with thoughtful planning early on. As your baby grows, take the necessary steps to get your family’s finances in order so you’ll be empowered and ready to take on this next step in your family’s journey once your baby arrives,.
It can be overwhelming and confusing at times to juggle all the moving parts that makeup preparing for a baby. Managing your finances, solidifying an estate plan, researching life insurance, and thinking about savings accounts for your future baby makeup one aspect. Of course, all the emotional and mental work that goes into preparing for a child is also part of the equation, so it may help to have a trusted professional that you can go to.
At Flourish Wealth Management, we understand how important family is and we are dedicated to helping you build the best financial plan for your family’s unique needs. If you’d like to talk with one of our professionals about the options available to you, please contact us today.