Making mistakes is normal for new parents.
You or your spouse are pregnant.
This has been confirmed by the doctor.
You are both excited and nervous.
This is your first child and you feel clueless about what to do.
According to a recent The Street article titled “Biggest Money Mistakes New Parents Make,” this uncertainty leads many new parents to spend more money on their baby than necessary.
On average, a family in the middle-income bracket will spend between $12,300 and $13,900 annually on expenses related to their child.
In the midst of economic challenges triggered by the pandemic, these numbers are especially daunting.
There is good news, however.
With careful planning, you can provide for your child and save money.
Start by knowing and avoiding five common mistakes made by new parents.
What are these?
Upgrading your home.
Many people choose to either purchase a larger home or make significant renovations before their baby arrives.
In general, babies do not require much space.
They are actually kinda small.
With a new child, you will have more expenses for things like diapers and medical bills.
Budgeting for these expenses may be better for you than upgrading your home.
Underestimating childcare costs.
Did you and your spouse both work before becoming new parents?
Are you both planning to work after the baby is born?
If yes, you should consider the added expenses of child care.
According to Care.com, the average weekly cost for a nanny is $565 per week and the average weekly outlay for a spot at a daycare center is $215.
If you plan to go on dates together, a babysitter can average $15 per hour.
One option is to reach out to neighbors or family members and take turns watching one another’s children.
Neglecting life insurance or estate planning.
Planning for incapacity or death is not pleasant.
It is necessary for new parents.
You have a small, vulnerable human being dependent on you.
Like, completely dependent.
You will need to designate a guardian for your child should you and your spouse both die.
You also will need to plan financially for your new baby.
Getting a life insurance policy can allow you to protect the financial security of your family were something to happen to you.
Your policy should have five to 10 times your annual salary in coverage, as a general rule of thumb.
Better yet, schedule a consultation with a life insurance professional to help you obtain the right type and amount of life insurance.
Spending too much on baby items.
New parents are inundated with advertising for a variety of gadgets and gear for their baby.
Many of these items are not needed at all.
Others may be needed for only a short time.
Babies grow fast.
You will be surprised.
Buying used or borrowing can prove to be better alternatives on the old wallet.
Delaying saving for college.
Although you will wait eighteen years for your child to attend college, new parents should start saving now.
This will allow you to put a little aside over a longer period of time.
By doing so, it will be easier to meet your savings goal.
If you utilize a 529 College Savings Plan, the money can grow tax-deferred much like a retirement fund.
Being a new parent can be daunting, but taking time to plan ahead will help you minimize the financial burden so you can enjoy this new stage of life.
Reference: The Street (Sep. 9, 2020) “Biggest Money Mistakes New Parents Make”