I Just Found Out I’m Going To Be a Parent — How Much Money Should I Save Before the Baby Is Born?

A photo of pregnant woman looking at man.
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So, you just got the news that you’re about to embark on the life-changing journey of parenting. Congratulations! A new baby brings an array of joys, challenges and responsibilities. Of course, one of the most significant aspects of preparing for parenthood is managing your finances. In this guide for parents-to-be, we’ll help you navigate the path toward a secure financial future for your family.

Budgeting for Your Bundle of Joy

Your baby’s arrival will transform your life in magnificent ways, but it will also bring new financial responsibilities. First, take a close look at your current financial situation. Reviewing your income, expenses and savings will help you shore up your financial foundation. Make a detailed budget for childbirth-related expenses, including hospital bills (call your insurance provider for details), prenatal classes and maternity wear. Research your company’s parental leave policies and government programs like the Family and Medical Leave Act (FMLA) that may offer unpaid leave with job protection. Modify your existing budget to accommodate these new baby-related costs, as well as any projected decrease in income for one or both parents. You might need to cut back on nonessential spending for a while or pick up a short-term side hustle before the baby comes. 

Example:Let’s say your estimated medical costs (even with insurance) for prenatal care, delivery and postpartum care amount to $5,000. Child care in your area may cost $1,500 per month, and you anticipate needing it for at least six months. You budget $1,500 for baby equipment and $1,000 for nursery setup. In total, you should aim to save at least $10,500 before the baby is born.

Squirreling Away for the Future

Investing in your child’s future is a gift that keeps on giving. Start by opening a dedicated savings account with a competitive interest rate for your child. You’ll also want to investigate options like 529 college savings plans or custodial accounts, as these typically offer tax benefits as you save for educational expenses.

Make Your Money Work for You

Determine specific savings goals. Whether you’re putting money away for summer camp, music lessons, college or a down payment on a home, a bit of joyful anticipation will help keep you motivated. After all, parents are human too, and it’s hard to save when there are so many cute baby clothes! Set up automatic transfers from your checking account to ensure consistent contributions without extra effort. 

Example:Saving $200 per month in a 529 college savings plan with a modest 5% annual interest rate can grow to over $70,000 by the time your child reaches college age. Many plans also make it easy for family members to contribute to your child’s college savings plan directly (a great gift idea!). 

Next Level Nesting

Now that you’ve prepared for some of the most immediate needs, it’s time to explore advanced strategies for optimizing your finances. Investigate tax credits available to parents, such as the child tax credit. If available, use HSAs and FSAs for medical expenses related to pregnancy, childbirth and child care. Contributions are often tax-deductible. 

Having a new baby can also bring plenty of anxiety and overwhelm. Though it may seem counterintuitive, one way to give yourself peace of mind as your family grows is to spell out your plans for the unexpected. Create a will that provides clarity about your assets and allows you to appoint a guardian for your child. Consider setting up a trust to manage and protect assets for your child’s future, helping to avoid probate and distribute funds over time. Evaluate existing life insurance coverage or consider signing up for a new plan. 

Make Your Money Work for You

The Emotional Part of New Parent Finances

Becoming a parent is an emotional and relational journey, and finances play a big role. Embrace the positive from your own upbringing. What went well and made you feel secure? What do you want to emulate from your childhood, and what do you want to actively change?

Further, you’ll want to discuss financial goals, concerns and roles regularly — especially if you and a partner come from different financial backgrounds. Money conflicts are common in relationships, and parenting adds another dimension when it comes to spending habits and risk tolerance. Getting to the root of these issues through open and honest communication is essential. Practice curiosity and empathy during disagreements, and don’t assume you know what anyone else is feeling. 

Extended family and friends often want to offer emotional and practical support during this time. Even if it makes you uncomfortable, now is the time to accept this help. Paying for help is a good idea too, whether it’s in the form of child care, a financial advisor or a therapist. You don’t have to do this alone. Practice self-compassion, as you will make many mistakes and learn from them through the ups and downs of parenting. 

Remember, every effort you make to ensure your child’s well-being, both financially and emotionally, is a priceless investment in their future happiness and success. May your journey be filled with love, joy and financial security for you and your little one.

Make Your Money Work for You

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