For a lot of people, parenting is an irreplaceable journey, one they would never trade.
Still, there’s a financial cost — and it can be substantial — to caring for a little person.
Whether you’re single or partnered, giving birth or adopting, planning years in advance or improvising, use these straightforward strategies to feel more financially ready.
1. Add an Extra $25,000 to Your Child’s College Nest Egg
Does it sometimes feel unfair that the ultra-wealthy can open any college door for their children while the rest of us stress about affording next semester’s books?
But not being a billionaire doesn’t mean you can’t borrow tactics the wealthy use.
Here’s a wealthy-person tip: they preserve money tax-free. With an app named UNest, you can tap into that same approach, which could result in roughly $25,000 more by the time your child heads to college compared with a standard savings account.
If you’re new to this, UNest walks you through the steps. It’s incredibly simple to begin saving as little as $25 a month into one of its tax-advantaged investing accounts. UNest also allows friends and relatives to chip into the plan for birthdays, holidays and other occasions. It’s easy to use, and those gifts can compound over the years.
When adding $25,000 is this straightforward, why wouldn’t you start? It only takes a few minutes to download the UNest app and set up an account.
2. Boost Your Savings
Plainly put: you’re going to require cash, so begin saving as soon as you can.
Leslie Tayne, lead debt-resolution attorney and managing director at Tayne Law Group, suggests prospective parents assemble an emergency fund if they haven’t already.
And another point: if you already have a savings account, that’s great — but it might not be earning much.
Right now, the average savings interest is crawling along at about 0.08%, per the FDIC. Deposit $100, and you’ll barely see any growth month to month.
With Credit Karma Savings, though, you can earn more than six times the national average.
Unlike many other accounts, Credit Karma doesn’t create obstacles to earning interest. With at least one cent in your account, you start accruing interest. Best part: no fees. The account is completely free.
Opening an account takes only a few minutes.
Pro tip: Take a cue from Nora and Shane Martin of Palm Harbor, Florida. When they learned they were expecting, they itemized expected baby expenses on a spreadsheet, totaled the costs and divided by six to set a monthly savings target for the next six months.
3. Sort Out Insurance
Bringing a baby home means someone will depend on you — and that responsibility can feel daunting.
Within a month of their son’s arrival, Scott and Jennifer Perry of Raleigh, North Carolina, began considering life insurance.
“I decided it was time once we brought a little guy into this world,” Scott Perry said. “If one of us died, the other would need to raise and provide for the child, save for college, etc. It’s that weight of responsibility you feel after having a kid.”
You might think you lack the time or funds for insurance. Yet an application can take minutes — and through a company called Bestow, you could provide up to $1.5 million of coverage for your family.
Premiums can begin around $20 a month.* The reassurance that your family would be looked after is invaluable.
If you’re under 54 and want a quick life insurance estimate without a medical exam or leaving the couch, get a free quote from Bestow.
4. Create a Baby Budget
Your household budget will need some adjustments once the new arrival comes.
The Martins considered themselves pretty frugal until they tracked their spending while expecting their son. They discovered opportunities to save by trimming entertainment and dining out and by easing up on pampering the dogs.
To get financially organized, the Martins adopted a zero-based budget, accounting for every dollar in. They carved out space to pay down credit card balances so they wouldn’t be stressed about bills when the baby came.
With a newborn on the way, you’ll need to plan for big one-time costs — delivery or adoption expenses, a crib, a car seat — and account for ongoing monthly costs like diapers, formula and daycare.
Remember, if you or your partner plans extended leave or to stay home, base your budget on expected post-baby income. Try living on a single paycheck for months before the baby arrives and stash the extra funds as savings.
5. Plan for Parental Leave
Newborns demand a lot of care. Childbirth is also a significant medical event for the birthing parent, often requiring several weeks of recovery — whether it’s a C-section or a vaginal delivery.
Time off to bond with your baby, heal, and adapt to family changes is essential.
Although the United States lacks universal paid parental leave, the Family and Medical Leave Act allows eligible workers up to 12 weeks of unpaid leave after a baby’s birth.
Your employer might provide some paid leave, or you may be eligible for partial wage replacement through short-term disability insurance. Many parents also bank paid vacation or sick days to use after delivery.
Talk with your manager or HR department to create a parental leave plan. If income gaps are likely, try to save enough during pregnancy to cover the shortfall.
6. Decide on Child Care
Of the many new expenses after a baby, many working parents find child care to be the priciest.
In a July 2018 survey by the Penny Hoarder of more than 1,200 parents with children under 6, 82% reported paying $500 or more monthly for child care. Over half spent at least $750 per month. Most respondents named child care as their largest child-rearing expense and said the cost left them surprised and overwhelmed.
If you’ll return to work or school after the baby, start exploring affordable child care options early and check whether you qualify for child care subsidies.
Some parents choose to reduce hours significantly or pause careers to become stay-at-home caregivers.
When the Perrys welcomed their son, Isaiah, Jennifer cut back from full time to part time to lower daycare expenses.
“We weren’t earning what we had been, and these big costs were now appearing,” Scott Perry said. “It was overwhelming — especially combined with our lack of sleep the first six months.”
Whether staying home by choice or necessity, consider the effect on household income and make sure your budget reflects that change.
7. Face Your Debt
Chances are you carry some debt — maybe a car loan, mortgage or student loans.
“That’s OK!” Tayne said. “As long as it’s manageable, it’s OK to have kids and debt.”
She does caution, though, that you should be confident you can keep up with payments after adding a child. Falling behind can trigger high interest and late fees that compound quickly.
If credit card balances are a concern, consolidating debt can simplify your finances.
If you owe $50,000 or less on credit cards, a site called AmOne can connect you with a lower-interest personal loan to pay off all those balances.
The advantage: you’ll have a single monthly payment. Personal loans generally carry lower rates (AmOne rates start at 2.49% APR), helping you get out of debt sooner. And: no credit card payment this month.
AmOne lets you check eligibility online without standing in line or calling a bank. It’s free to check and takes just a couple of minutes — it might help you become debt-free years earlier.
8. Draft a Will
Many parents say this about wills: “I know I should have one, it’s just…”
Creating a will can seem intimidating, but it’s vital when you have children.
A will is a legal document that specifies who inherits your assets and who would become your child’s guardian if you pass away. It’s unpleasant to consider, but like life insurance, it’s crucial to prepare for the worst-case scenario.
Guides on how to write a will can walk you through the process. They cover everything you need to know, including differences between wills and trusts, typical costs (yes, wills can cost money), and options for writing one even if funds are tight.
9. Keep Your Retirement on Track
Having a child doesn’t mean you should neglect your own future.
Make sure your retirement savings remain on course.
“Before having kids, it’s important to have a solid start on your retirement fund and a plan to keep contributing,” Tayne said.
If you struggle to regularly fund retirement accounts, incorporate it into your budget. Tayne suggests treating retirement contributions like rent — essential.
“Pay it at the start of every month so it’s less tempting to spend elsewhere,” she advised.
If your employer offers a retirement plan, see if you can set up automatic contributions so a portion of each paycheck goes straight into savings.
Carson Kohler (carson.k@examplesite.com) is a staff writer at Savinly. Senior writer Nicole Dow contributed to this piece.
*Bestow: Policies are issued by Bestow Life Insurance Company, Dallas, TX on policy form series BLI-ITPOL. Bestow Life Insurance products may not be available in all states. Policy limitations or restrictions may apply. Not available in New York. Our application asks lifestyle and health questions to determine eligibility in order to avoid requiring a medical exam. Prices start at $10/month based on an 18-year-old male rated Preferred Plus NT for a $100k policy for a 10-year term. Rates will vary based on underwriting review.
