Although most people don’t think of having a child as an ‘investment’ per se, the cost to raise a child today is definitely one of the biggest investments that a family will make. It was estimated recently by the US Department of Agriculture that the average cost to raise a child born in 2011 until they reach the age of 18 is approximately $235,000. Those numbers are based on average, middle-class earners and don’t take into account private school, vacations, college tuition costs and other child and baby related expenses, which can total thousands more.
That being said, if you’re a new parent and you’re looking to get your finances in order so that you’ll be able to raise your child well, this blog is for you. There are certainly plenty of ways to raise a well-adapted child on a budget (and make sure that you save for retirement at the same time) so have a look and, as always, enjoy.
Savings and retirement account changes. If you’ve been a responsible adult for a number of years you probably have already started saving for retirement, putting together an emergency fund and possibly even working on building a portfolio of investments. With a child coming, there are a number of adjustments that you’re going to have to make to all of those so that you’ll have the finances to pay for everything that babies going to need as well as all of the hospital costs for the birth. Indeed, as soon as you know that you’re going to be having a baby, you should start putting extra money aside in a ‘baby account’ to cover all of the unknowns that will certainly be coming your way.
What to do about tax and estate planning. One of the biggest considerations about having a baby is that you’re going to get a number of new tax exemptions and child tax credits. Make sure of course that you take advantage of those at tax time. Having a baby also puts a lot more responsibility on your shoulders since now it’s not all just about you. Working with a professional to draw up a will and possibly set up a trust for your child is an excellent idea as well as designating guardians to take care of your children and their affairs should you pass away untimely.
What are your childcare options? Having a child means that it’s possible one or both spouses will have a change in employment status and an accompanying tax and social security change. Knowing this, it’s vital that you take a realistic approach to childcare options and decide if daycare or possibly a nanny is necessary.
Don’t forget about life insurance. For that matter, disability insurance should something go wrong during the pregnancy is also a good idea as well as making sure that the top earner in the household has sufficient life insurance to protect your family for at least 20 years. Once you know you’re pregnant, or if you’re planning on getting pregnant, you should check with your medical insurance provider to get complete coverage and also to make sure that you’re able to visit the doctor that you want rather than the doctor your insurance pays for.
What other changes will you need to make? If you and your spouse are young and living in an apartment or a starter home, you’ll definitely want to start planning on moving to something bigger. Having a baby at home full time may also cause you to change or at least reevaluate your employment situation. For example, you may wish to search for a new job that has better insurance benefits and, if you can, higher pay.
While it may seem that 18 years is very far away, you’ll be surprised how fast years fly by. The cost of everything continues to rise, including food, clothing, medical care and of course college tuitions. For that reason, today, more than ever, it’s extremely important to start saving as early as possible for your child’s continuing education.
One of the best things that you can do of course is to bookmark our website and come back to visit us regularly as we always have excellent financial information here, much of which can be very helpful for new parents. See you then.