Family finances: Planning for your future
Whether you're a new parent or hope to be one soon, there’s no time like the present to plan for your family finances. We’ll help you get started.
Starting a family can be one of the happiest events in your life—and possibly the most expensive. According to the U.S. Department of Agriculture, a middle-income family with a child born in 2013 can expect to spend about $245,340 for food, shelter and other necessities over the first 17 years—and that doesn't include college costs.
But you can ease the impact of expenses by getting serious about your family budget even before your baby arrives.
Key considerations when becoming a parent
"Most important is to have an emergency fund in place," says Robert Payne, senior financial services representative with Principal® in Greensboro, North Carolina. He suggests saving 3 to 6 months' worth of your take-home pay.
Create a budget—and stick to it.
Develop a family budget that takes into account current living expenses, plus new-baby-related expenses. Besides ongoing costs—health insurance, copays for doctors' visits, diapers, formula, food, clothing, daycare, and so on—factor in one-time costs for outfitting the nursery and stocking up on baby gear.
It's never too early to start saving for college—and the earlier you start, the less you’ll feel the impact to your income. Payne suggests learning about your state's college savings program, which may offer preferential tax treatment.
"You need to make sure you continue to fund your retirement—at least up to the plan's matching contribution," Payne says. Skimping on contributions to save for future college expenses can be detrimental to your retirement. Employer-sponsored retirement plan savings don't count in assessing financial need for financial aid benefits.
Be smart about benefits.
Contact your corporate benefits department to determine what changes you’re allowed to make after welcoming a new child into your family. You may want to enroll in benefits you previously skipped, such as long-term disability or a flexible spending account (FSA) to pay for daycare.
Payne suggests meeting with a financial professional to help ensure you have adequate life insurance coverage, as well as consulting with your attorney to draw up a will. Although you may not want to think about worst-case scenarios during such a happy time, you can rest easier knowing your family will be taken care of if you aren't around.