Financial Checklist For New Parents

You’re enjoying your new baby and everyone’s taking pictures of your bundle of joy. The last thing you’re thinking about is financial planning for your little one as he grows but it’s important to plan for his future now. From diapers to daycare, the costs of raising a child add up quickly, and having a solid financial plan can help you navigate these expenses with confidence. Here is a financial checklist for new parents.

How to Budget for a Newborn

Budgeting for a newborn doesn’t have to be complicated. Start with an emergency fund. This is crucial because financial emergencies come up, and you want to be prepared when they happen. Automate a portion of your check every pay period to your savings account and put surplus money such as tax refunds toward it.

Since newborns grow out of their clothes quickly, it’s unnecessary to buy high-priced outfits for them. Buy secondhand infant clothing from local thrift stores, consignment shops, and eBay. Ask friends if they have old newborn clothing they don’t need to give to you.

Purchase life insurance after your baby is born. Life insurance is a must for new parents because if you and your spouse pass away, your loved ones will have the funds they need to pay for your funeral and burial costs. They’ll also be able to care for your child financially. This is an important part of a financial checklist for new parents.

Save money on diapers and formula by joining a wholesale club such as Costco or Sam’s Club. These stores let you buy items in bulk and it reduces frequent trips to the store to buy baby supplies. You can also buy a decently priced stroller, car seat, and crib here.

Utilize Your Health Savings Account

If you have a high-deductible health plan, open a health savings account. Your contributions, the earnings on those contributions, and withdrawals from your health savings account are tax-free as long as you use the funds for qualified medical expenses. You can also invest the funds in your HSA to purchase stocks and mutual funds. This lets the funds grow over time.

Start Investing for Your Child Early

Don’t wait until your child is a teen to invest for him. Now is the time to open a brokerage account and purchase investments that will earn him thousands by the time he reaches adulthood. The first step is to open a custodial brokerage account through websites such as Vanguard, Charles Schwab, or Fidelity. Then deposit money into the account and buy investments. Finally, watch the money increase in your child’s account and add funds to this account as often as possible. When your child becomes an adult, the account will be his to use.

Tackle Childcare Costs

If one or both of you will return to work after the baby is born, you’ll need to figure out how to pay for childcare expenses. One idea is to have trusted family members or friends watch the baby while you work. If your employer allows you to set up and contribute to a dependent care flexible savings account, this is another option. This is an account where you use the funds for childcare costs.

Research different local in-home daycare centers and inquire about the services and costs. In-home daycare centers are less expensive than mainstream daycare centers but verify that the staff is licensed or certified and that the in-home daycare center abides by local safety regulations.

If you have preschoolers, enroll them in the Head Start program. Apply at a local Head Start center and submit the required documents. Head Start prepares your preschooler for kindergarten and it helps them make new friends.

Update Beneficiaries on Your Accounts

Update your beneficiary lists to include the baby on your financial accounts. This is vital because even if you name your child as a beneficiary of your accounts in your will, it won’t happen unless you update your beneficiary lists. Add this to your financial checklist for new parents.

Develop Your Family Philosophy About Money

Now that you’re parents, you need to develop your philosophy about money going forward. What will you teach your child about money? How do you plan to create generational wealth for them? Discuss this philosophy with your spouse and then write down your plan. Maybe you will start a business to pass on to your child. Or you may decide to give your child a weekly allowance and require him to give part of it to someone in need to teach him generosity.

Pay Down Debts

Excess debt will cripple your financial goals as new parents. Create a plan to eliminate debt so more of your money goes toward savings, investments, and other long-term goals such as your child’s college savings fund. Get free copies of your credit report from AnnualCreditReport.com and you’ll see reports from these credit bureaus; Experian, TransUnion, and Equifax. Write dispute letters to the credit bureaus if you see errors on it. Contact your creditors and work out a flexible payment plan.

Evaluate Your Career Path

Maybe you’re doing well in your career and your salary is great. But what if you realize that your current career and salary are inadequate for your new life as a parent? This is the time to evaluate your career path and look for ways to advance in your current one or upskill for a different industry. Meet with your supervisor to negotiate for a higher salary or inquire about new opportunities at your job. Take certification courses to learn higher-paying skills.

Create a Budget

A budget is an essential part of a financial checklist for new parents. Start by listing all of your income sources and then you would list all of your fixed expenses such as rent or mortgage, car note, and utilities. List your miscellaneous expenses such as dining out, subscriptions, and school expenses. Finally, remove anything that you can’t afford in the budget.

Parenthood is a beautiful yet challenging journey. Having a solid financial plan for your growing family can help you build wealth for years to come.