Because having a baby is stressful enough.
It’s no secret that having a baby is expensive. In fact, for a baby born in 2017, parents can expect to spend an average of $14,260 each year.
Between that and the ever-increasing costs of college, new parents may want to rethink their budgets.
Try incorporating these smart money moves to help lessen the financial strain of parenthood. After all, isn’t being a parent hard enough?
Plan — and Save for — an Emergency
Accidents are a part of life, and part of preparing for parenthood is preparing for the unpredictable. Amy Godwin, CFP® and Vice President of Fidelity Investments’ Bethesda Investor Center, as well as a mother of two, suggests depositing five percent of your take-home pay into an emergency fund that’s completely separate from your regular savings or checking accounts.
Start College Savings Now
By the year 2030, the cost of a four-year degree at a public university is expected to top more than $205,000, according to the U.S. Department of Education. All the more reason to start saving now.
It’s never too early to start saving for college, Godwin says, noting that if you open a dedicated, tax-advantaged college savings account (like a 529 plan) now, you’ll have up to 18 years to grow the amount and take advantage of the tax benefits.
You can also encourage friends and family to contribute to the account in lieu of gifts for birthdays and other holidays.
Take Advantage of Flexible Spending Accounts
New parents should review their benefits to see if their employer offers dependent flexible spending accounts, Godwin advises. You can fund these accounts directly from your paycheck with pre-tax dollars, which also helps you save.
“Kids come with many new expenses, so use these funds to pay for childcare or summer day camp down the road,” she says.
Keep Your Will Up-to-Date
This is especially pertinent for new parents to protect their growing family.
“Now that you have a newborn, it’s important to make sure you have an updated will in place, outlining your intentions for the care of your family and your finances in case something happens,” Godwin says. Although no one wants to think about the unthinkable happening, it’s always best to be prepared.
Review Beneficiary Designations
Review all your financial accounts and make sure you have beneficiaries for each, Godwin says.
“Keeping accounts and beneficiaries up to date brings peace of mind so you can focus on what’s important — family time with your new baby,” she says.
Want more tips? Check out Fidelity’s Having a Child Checklist for a full list of to-dos.