However, being ready for a baby also includes being prepared financially. Not only for when the baby is first born, but also as they grow into adulthood. And according to the US Department of Agriculture, the average cost of raising a child from birth to 18 averaged $226,920. That is a huge chunk of change – about $12,000 per year.
So what do you need to do to prepare?
Create a Baby Fund
One thing that you want to make sure to do as soon as possible is to get together a “baby fund”. This is simply a savings account set aside for the baby, that you put extra money in each paycheck. You would be surprised at how much money will accumulate in nine months. Not to mention how helpful it will be when the baby arrives. There are going to be plenty of unexpected expenses so this fund will be useful in those times.
Start a College Savings Account
Another type of savings that you may want to start would be a separate college savings account. Most parents hope and pray that their child will be geniuses who graduate with a full scholarship. Unfortunately, this is not the case for the majority of parents so planning ahead for college education is important. There are special accounts that are perfect for this type of savings and with a little research it shouldn’t be hard to find the right one.
Think smart when it comes to your new addition. Make a point to sit down with your spouse and discuss working arrangements. If you are currently living on two incomes, figure out if it would be worth it for you both to continue working and paying for childcare. Just remember that childcare is very expensive, especially for a newborn. Sometimes, it’s actually cheaper and more beneficial if you are able to go down to one income with one spouse staying home with the child.
If you choose the route of going down to one income, try to start living as if it has happened already. This will give you and your spouse a generally good idea of how you will be able to handle one income. It will also help with reconstructing your budget.
Changing current shopping habits may not be such a bad idea either. When you go grocery shopping, consider buying store brands instead of name brands. I find that even though store brands are cheaper, the quality is the same or even better.
Creating a budget and saving money on every day things will help you to save money which can be used for baby expenses. You can also create new habits, like shopping around or looking for coupons. Spending a few minutes to look up coupon sites to get Buy Buy Baby Coupons could end up saving you hundreds on supplies you’d normally pay full price for!
Create a Will
Create a will for yourself and encourage your spouse to do so as well. The will should delegate what would happen in case of a tragedy. This is not typically a topic that parents want to think about, but it will put your mind at ease knowing that your child will be okay if something were to happen.
Check out our guide to the Essential Estate Planning Documents you need to get.
Having a child is the most rewarding experience. If you plan well and make financial preparations, it will immensely help to alleviate any financial burdens, allowing you to enjoy your newborn to the fullest.
Readers, I know that some of you are already parents. What financial tips do you have for parents-to-be?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.