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6 Ways to Stay on Track When Financial Planning for a Baby

Having a child is one of the most important things you’ll ever do, and it takes a significant amount of personal planning. You’ll have to worry about getting their room organized, buying clothes, baby-proofing the house, and how you’ll cope with the lack of sleep.

There are also monetary considerations because children are costly to feed, clothe, shelter, and entertain. It’s important for any expecting parents to do some financial planning to assess their money situation and look at their long-term goals. They will then be able to lay out some strategies for achieving those goals with their existing income.

Throwing a baby into the mix could change those goals, of course, and will undoubtedly alter expenses. It’s crucial, then, for expecting parents to develop a new financial plan with their dependents in mind to ensure they still have a clear path to financial freedom. This guide will take you through some critical aspects of financial planning for a baby and how you can handle the job. Read on to learn how to financially prepare for a baby.

Why You Need to Learn How to Financially Prepare for a Baby

It feels like everything nowadays is expensive, and making a major purchase or developing a retirement strategy will take some thought. The plan can quickly change when there’s a baby involved. Adjusting your approach based on your new addition and the accompanying expenses has some clear benefits, including: 

planning for a baby financially

A Decision-Making Guide

Your new financial plan can act as a decision-making guide moving forward. You can now afford that vacation or new vehicle without sacrificing some of the baby’s needs. Having a financial plan in place will let you know the best decision to make for the child’s future.

Emotional Benefits

There’s a lot of stress involved with raising a child, particularly if finances become an issue. There’s an immense emotional and mental health benefit to having a financial plan in place because you’ll always know where you stand. The result is greater peace of mind and a clear understanding of where you are economically.

Reach Financial Goals

Creating a financial plan with your baby on the way is also essential to achieving your financial goals. You don’t have to give up on all of your dreams just because you have a child, but you might need to alter them. Your financial plan will show you the steps you’ll need to take to get there while giving your child what it needs to thrive. 

Having a baby is sure to cost you some money and could slow you down as you reach your goals, but it’s still possible to get there. Following a few tips along the way also makes it more likely that your plans are attainable.

planning for a baby financially
couple financial planning for a baby

6 Tips for Planning for a Baby Financially

Your life changes the second you find out you’re expecting a baby, and it never returns to normal. You’ll have to alter your financial thinking and integrate some new concepts into your plan to make it all work.

1. Look at Insurance Options

Health insurance is a critical part of raising a child, of course, but you might think about life and disability insurance for yourself as well. That will provide the baby some financial support, even if you can no longer provide it. An insurance payout will be highly beneficial if unforeseen events occur in your life.

2. Have Emergency Cash on Hand

A rainy day fund is always a good idea, but it’s even more critical when ensuring your child always has shelter and food. Keep in mind that a traditional emergency fund will have three to six months of living expenses, but your costs will be far higher because of the kids. Many parents keep this money in an interest-bearing account or market so it grows when not in use.

3. Learn About Tax Breaks

One way becoming a parent can help you financially is through the available tax breaks. You might be eligible for the Child and Dependent Care Credit, which covers 20% to 35% of certain expenses related to raising a child. Your employer might also sponsor a flexible spending account (FSA), which allows you to put aside up to $5,000 of tax-fee money for childcare each year.

4. Create a Retirement Plan

Retirement might be the last thing on your mind as a new parent, but the day will eventually come, and you want to be sure you’re ready. It’s never too early to prepare for retirement, so your financial plan should include some savings options. Your last day of work is coming sooner than you think, and having a retirement fund can make this possibility a reality.

5. Think About College

College is expensive today, and barring any unforeseen changes in the way we educate our children, it’ll cost even more 18 years from now. The earlier you begin the savings process, the longer the interest will compound, making it more likely that you’ll have enough to put your child through school.

6. Write a Will

Even if you don’t have much in the way of assets, putting a will together is a vital part of financial planning for a baby. It will determine crucial details such as who takes care of the baby if something happens to you and your partner. The will also informs the courts of your beneficiaries.

The more you plan, the less stressful you’ll find your nights as a new parent. You won’t be getting any sleep, of course, but at least it’ll be the baby keeping you awake rather than your finances. 

how to financially prepare for a baby

Speak With a Financial Planning Expert

Financial planning is a complicated process, but it’s easier when you have the guidance of professionals.  Bogart Wealth offers financial planning and wealth management services with the client-first approach you get from a fiduciary. Feel free to contact us today with any questions you have about how to financially prepare for a baby or any other wealth management needs.

How to Financially Prepare for a Baby FAQs

  • Create a baby fund
  • Analyze your budget and cut unnecessary expenses
  • Consider the long-term financial impact of having a baby
  • Yes, you should review your health insurance plan
  • Look into life insurance
  • Consider disability insurance
  • Write a will
  • Appoint a guardian
  • Consider creating a trust
  • Research your childcare options
  • Determine your childcare budget
  • Plan for potential changes in income
  • Know your employer’s policy
  • Determine the length of leave you would like to take
  • Plan for potential changes in income
  • Consider opening a 529 college savings plan
  • Determine how much you would like to contribute
  • Start saving as early as possible

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Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bogart Wealth, LLC [“Bogart Wealth”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bogart Wealth. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Bogart Wealth is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bogart Wealth’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.bogartwealth.com
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