Having a baby is one of the most exciting events a person will go through, but it can also be one of the most expensive. To prepare, responsible parents must take steps to be financially ready for everything from diapers to college. Follow these tips to get ready.
- Save money. It may seem obvious, but having a cash cushion is one of the best things you can do for your new family. If you’re used to living on credit cards when an emergency comes up, it’s time to stop. Cut back on whatever you can until you have about six months’ worth of your monthly expenses saved up. Emergencies tend to happen a lot more frequently when you have a baby, make sure you’re prepared.
- Expand your insurance coverage. It may seem counterintuitive to increase one of your expenses, but increasing your insurance coverage can save you thousands of dollars down the road. Start by making sure the baby is included on your health insurance. While it might cost hundreds more a month, it is better than being stuck with a large hospital bill the first time you have to run your child to an ER with an ear infection.
- Start a 529 account. These accounts are a tax deferred way to save for college. After completing the first two steps, set something aside for future college expenses. Higher education expenses are increasing every year, but putting aside as little as $25 a month will help significantly when the time comes. Money in these accounts can be invested in a variety of ways, and it is possible to take the money out penalty free if your child gets a scholarship. Accounts can also be transferred if your child decides not to go to college.
- Don’t get sucked in by ads. New parents tend to overspend on a lot of products that companies convince them they have to have. Pick nursery furniture that is cheap, but safe and follow the same philosophy on everything else. While some days can seem like they’ll last forever, the truth is that your child will not use much of the stuff you buy for very long. Within two years he or she will have outgrown the crib, stroller, high chair, and a lot of clothes and toys.