Oh Baby! Advice From A New Mom And Financial Coach
Having a baby has a huge impact not only on new parents’ physical health, mental health, and ability to get a good night’s sleep, but it radically changes their financial picture as well. According to 2015 statistics from the U.S. Department of Agriculture it costs an estimated $233,610 for a married couple with two kids to raise one child for 18 years. Adjusted for inflation in 2022 that goes up to $292,051.
Workers Credit Union Assistant Vice President and Lowell Branch Lead Laura Cavaleiro is also certified financial coach and a new parent with a young son at home. She has some tips for her fellow parents about how to best adjust financially to a new arrival.
- Plan ahead –There are a blinding number of decisions involved with a new baby and it’s best to start early. For those returning to work, childcare needs to be figured out long before delivery day. The Economic Policy Institute says in Massachusetts daycare for a child under the age of 15 months costs an average of $20,913 per year. Many daycare centers have long wait lists, so parents need to start early and comparison shop to make sure the center works in terms of their budget, their proximity to work, and desirable features.
- Get the financial house in order – Once the new baby arrives, an avalanche of insurance, tax and other paperwork must be dealt with, and more choices must be made. Some of those decisions involve issues that are difficult to think about, such as choosing a guardian, determining a healthcare proxy, estate planning, and buying life insurance. Preparing for the worst is the best gift a new parent can give their child because of the headaches it removes if the unthinkable happens.
- Prioritize saving – While college may seem like it is light-years away for new parents, it’s a cost that needs to be planned for starting day one. Saving options include a 529 plan that allows them to save money for their child’s education tax free or a Union Transfers to Minors Act (UTMA) custodial account that allows a minor to receive gifts without the aid of a guardian or trustee. They should consider putting financial gifts from friends and family in these accounts, so the money doesn’t disappear into household expenses, and setting up an automatic transfer to make sure money is being deposited on a regular basis. It’s also advisable to maintain and grow a healthy emergency fund for unexpected expenses.
- Think before buying – There are countless products aimed at new parents. Consider what is essential and what is not. For example, items only needed for a short while such as a bassinet or diaper genie may not need to be bought at all. Ask if insurance can cover the cost of a breast pump before buying one. Friends and family may be more than happy to loan or give new parents items like clothes that are in good shape, cribs that still meet regulations, and swings. Some of these items may also be purchased secondhand.
- Accept the change – New parents need to acknowledge that their world is different than it was before their child was born. The cost of diapers and formula alone can add up quickly. A big mistake some new parents make is trying to keep the same lifestyle they had. Instead, differentiate between wants (such as eating out and manicures) and needs (like food, diapers and baby clothing) and budget accordingly.
One of the most important things for new parents to remember is they are not alone. Besides friends and family there are many other resources available for guidance and advice. For those unsure about financial planning, consider talking to a Workers Way certified financial coach. They are always happy to help.
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