The skyrocketing costs associated with raising a child are intimidating. Worrying about how to afford diapers and medical care for a new baby is stressful enough for new parents without adding the pressure of rising tuition fees as your child grows.
A growing number of financial methods are now used by many to save money or build their financial portfolio. Although you may be familiar with a couple of these financial terms, you might not realize how these accounts and other financial considerations can greatly affect the baby you’re going to have.
1. Solid starter
Parents like Beth and Bill Ryan of Lake in the Hills, Illinois, found dedicating time to their financial portfolio prior to having a baby beneficial. “Between the extra and unexpected costs of having a child, and the amount of time it took to adjust to being parents, we wouldn’t have been able to investigate all of our options as thoroughly as we did until our daughter was older,” the mom of two explains.
Planning your finances before your baby arrives offers the chance to save based on both long-term and short-term goals. Registered financial planner and certified financial specialist Rick Sabo of Gibsonia, Pennsylvania, stresses the importance of familiarizing yourself with savings plan options. “This can offer financial assistance in the first months of having a baby as well as create the flexibility to adjust your savings plan as your child grows and your family’s needs change,” says Sabo, the Regional Vice President of Money Concepts.
Sabo is one of many financial experts who help their clients rating alternatives such as working from home or forming a babysitting coop with friends and neighbors.
Click here to read more on budgeting for your new baby and about life insurance.
Read more on budgeting for your new baby and about life insurance.
2. Budget for your baby
New parents allocate money for a crib or to decorate a nursery, but they often do not anticipate the actual day-to-day costs of having a baby.
Parents like the Ryans realized that even though it is convenient to pick up a pack of diapers at the local grocery store, you pay for that convenience. “I wish we [had] compared the prices of formula, diapers, baby food, developmental toys, etc. at grocery stores, discount centers, and pharmacies before our daughter was born to have better planned our budget,” Beth Ryan admits.
Consider online and bulk purchase from wholesalers and thrift markets as alternatives to replenish your stock of high consumption items.
Another area of consideration is medical expenses for your newborn or baby. Know your health insurance plan’s limitations and practices for all co-payments, prescriptions plans, and referral requirements ahead of time to determine the most economical pharmacy for your child’s prescriptions.
3. Life insurance
Contemplating your own mortality is hardly something a parent-to-be equates with bringing a wonderful, new life into the world.
Although you hope to not need it, making sure you and your spouse have proper life and health insurance coverage prior to having a baby helps protect your family.
Life insurance premium tailor savings plans and accounts before a child is born, as well as provide financial guidance as their family matures. He explains that considering a few significant savings and financial alternatives before your baby is born can punctuate the excitement of having a new baby and set your family on the path to financial security. “You’ll bring your child into a home with excellent and responsible financial examples for him to emulate,” Sabo adds.
Click here to read on about reviewing your monthly bills, the cost of child care versus staying home and mutual savings.
Read on about reviewing your monthly bills, the cost of child care versus staying home and mutual savings.
4. Review your monthly bills
Barbara Muehlfelder is a personal banker and professional home organization consultant in Genoa, Wisconsin, who encourages parents to begin taking stock in their financial life as soon as they can.
“The first [step] to saving for a baby is closely reviewing your monthly expenses and income,” Muehlfelder says. Knowing exactly how much you take home as well as what you spend will help you identify how much disposable income you can shift to in preparing for a new baby.
“Creating a log of expenses that includes inconspicuous items such as movie rentals and postage stamps is an enlightening way to understand how much money you can allocate to savings or for your new baby.”
If you’re hoping to take an extended leave, reduce your hours, or even quit your job, lowering your monthly bills can make the transition easier. Paying off high interest credit cards before your baby is born can lead to additional disposable income to spend on your new child or to channel into a new savings plan for your growing family.
5. Cost of child care vs. staying home
If you compare the combined cost of travel and child care expenses against net salaries, both parents returning to work after having a baby does not always produce significant financial gain. Factors rates are generally based on your age and health at the time of purchasing the policy. Lock into a low rate and adequate coverage that your family can grow into for many years to come. Remember to factor in expected increases in your earnings and at least six months of your average bills in order to purchase coverage that will ensure your family maintains their current lifestyle and can afford education expenses.
6. Mutual savings
With many funds and growth stocks offering low to medium risks, you can save for setting up a new nursery, day care, or tuition. Sabo also recommends adopting an attitude that depositing money into some type of savings plan is as important as paying your monthly bills. With the mindset of “what you don’t see, you won’t miss,” arranging for your mutual fund deposit to be automatically debited from your paycheck or primary checking account further simplifies saving money.
Click here to read on about tuition options.
Read on about tuition options.
7. A number of tuition options
Taking advantage of employer-sponsored pension plans is one of a few smart options to provide for your retirement. However, your family will need financial solvency years before you retire and access those accounts. Establishing an education savings account before your child is born allows for even more time to prepare for educational needs.
“Regardless of which savings plan best suits your family, it is never too early to begin,” notes Muehlfelder. Rick Sabo agrees as he adds, “With the variety of choices available, and the rising costs of raising children, starting to save before having a new family is as important as baby-proofing your home or organizing a nursery before bringing your baby home.”
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