I’m a Financial Expert: The No. 1 Money Mistake Americans Make When Starting a Family
Written by
Cindy Lamothe
Edited by
Jenna Klaverweiden
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Starting a family is one of life’s most exciting milestones, but it also comes with a whole new set of responsibilities, especially when it comes to money. Between diaper runs, daycare decisions and the endless stream of “must-haves,” it’s easy to feel overwhelmed.
And while everyone’s financial situation is different, there’s one common money mistake that trips up a lot of new parents.
The No. 1 Money Mistake New Parents Make
GOBankingRates spoke with Andrew Gosselin, CPA, personal finance expert and senior contributor at SaveMyCent, and Michael Foguth, founder of Foguth Financial Group, to discuss what that big mistake is — and how to avoid it.
“The biggest mistake I see new parents make is not adjusting their financial game plan the moment the family grows,” Foguth said. “A lot of people keep living — and spending — like they’re still a party of two, but kids change everything: daycare, medical expenses, insurance, education costs…it adds up fast.”
Here’s what else they had to say.
Early Costs Can Snowball
According to Gosselin, new parents often pour so much energy into creating the perfect nursery that they forget how quickly those early costs can snowball. Buying the latest stroller, a smart bassinet and a bigger car can devour savings in a matter of weeks.
Many of these items are used for only a few months before the baby grows into the next stage. Carefully choosing essentials and borrowing or buying secondhand leaves more room in the budget for true priorities.
“Childcare costs arrive right after the baby gear bills,” he said. He explained that daycare tuition, nanny wages and occasional babysitters add up faster than most new parents expect, and the monthly expense can rival a mortgage payment.
The biggest issue though? Parents forget to create a comprehensive budget balanced between immediate needs and long-term security.
Build These Costs Into the Family Budget and Prepare
Building these costs into the family budget before they start helps new parents avoid the shock that comes when the first invoice arrives.
“Planning ahead also lets parents compare options, qualify for workplace benefits and lock in spots at quality centers that fill quickly,” Gosselin said.
Amid the excitement, he said it’s also easy to postpone building an emergency fund or purchasing term life insurance. Yet an emergency fund is the cushion that prevents unexpected medical bills or car repairs from becoming household debt.
“Adequate term life insurance secures the family’s future if something happens to a breadwinner, allowing the surviving spouse or partner to focus on caregiving rather than finances,” he said.
These simple steps protect the family from the kind of financial shocks that can derail carefully laid plans. Foguth agreed. “What new families need is a proactive plan. Start with life insurance and an emergency fund — that’s your safety net,” he said.
Then, he recommended looking at your budget. Find places to trim and reallocate for future goals, like saving for college or upgrading your home. And don’t forget about updating your will or trust. “It’s not fun to think about, but it’s a must,” he said.
Don’t Forget About Retirement
Focusing on diapers today can lead parents to postpone saving for retirement and their child’s education, according to Gosselin. But every year of delay means forfeiting the power of compound interest, which makes it harder to catch up later.
Even small automatic contributions to retirement accounts and education savings plans can keep long-range goals on track and reduce stress down the road when college or retirement finally arrives.
A Launchpad for Lasting Stability
According to experts, all of these issues tie back to one root mistake, which is failing to create and follow a comprehensive budget balanced between immediate needs and long-term security.
Controlling baby gear spending, accurately projecting childcare costs, maintaining an emergency fund, securing life insurance and steadily saving for future goals form the foundation of a healthy financial life.
“Starting these habits early turns the first year of parenting from a source of money worries into a launchpad for lasting stability,” Gosselin said.
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