top of page

Mommy and Me Money: Financial Planning for New Parents in 5 Easy Steps

Updated: May 11, 2023

Are you currently expecting, adopting, or hoping to be soon? Congratulations! Having a child is one of the most joyous and life-changing experiences a person can go through.

With the joy and anticipation, however, can also come a bit of….uncertainty.

How can I balance my career with a newborn? Will I be able to retire comfortably if I have children? How can I provide well for my child (while also not spoiling them)?

I get it. I had many similar questions and uncertainties as I was preparing to start my family, too.

So while I can’t help with all your new-parent questions swirling around your head (breast vs. bottle feeding, natural vs medicated birth, sleep training, etc.), I do want to encourage you in financial planning for new parents.

Financial Planning for New Parents in 5 Easy Steps

It costs approximately $233,000 to raise a child from birth to age 17, according to an estimate made in 2022 (and unfortunately, this does not include college expenses). Phew! That’s quite the undertaking, especially if you have the United States average of 1.94 children.

Before starting your family, it’s essential to have a financial plan. Spend some time working on this five-step financial checklist for new parents:

1. Take stock of your current finances

2. Review your insurance

3. Upgrade your budget

4. Kick your savings up a notch

5. Consider your career plans

1. Take stock of your current finances

Before you determine where you’re going, you need to know where you’re starting! Set aside time with your partner to review your:

  • Resources: This includes all of your income (primary career income, side hustles, investment income, rental income, etc.) and any benefits you receive from your jobs such as healthcare, stock options, HSAs, 401(k) matching, etc.

  • Expenses: This could take a while depending on whether or not you’ve been budgeting, but include both essential and non-essential expenses.

  • Assets: List your assets and their estimated values, this includes things like properties (current market value), cash, retirement accounts, cars, business interests, and personal property.

  • Liabilities: List your liabilities such as your mortgage(s), car loans, student loans, personal loans, and rolling credit card debt.

  • Investments: Perform an investment portfolio analysis to evaluate your portfolio balance, performance, risk, and diversification.

  • Financial goals: This can include your short, medium, and long-term financial goals. Check-in on your progress and whether or not they need to be updated.

2. Review your insurance

As a new parent, it's important to review your insurance coverage to ensure you have adequate protection for your growing family.

Health insurance

Pregnancy and childbirth expenses can be significant, including prenatal care, delivery charges, and postnatal care. Review your current policy and understand what expenses are covered and what may not be.

If you have a high-deductible health plan with access to an HSA, take advantage of it! You’ll receive tax benefits while building up a savings fund to pay for pregnancy and childbirth costs.

The birth of your child will be considered a “qualifying event” meaning you can change health insurance plans outside of open enrollment. Use this time to decide which medical plan will fit your family best once your little one arrives.

The jump to a family medical plan can bring a substantial change to your deductible, consider this in your budget (more on that below!).

Life and disability insurance

Review your life insurance coverage and consider purchasing or increasing your policy to provide financial protection for your child and spouse in case of unforeseen circumstances.

Additionally, if you don't have disability insurance, consider getting it to protect your income in case you're unable to work due to illness or injury.

3. Upgrade your budget

As we saw above, the expenses associated with raising a child are quite large. While financially preparing for a child, you can practice your new budget in advance to get used to the new expenses.

For example, if you’re going down to one income once your baby arrives, try living on that one income now. Use the extra money for your emergency fund, investing, or paying down debt. Or if you’re both going to continue working, make practice daycare bills each month (while really putting the money toward your current financial goals).

You don’t have to split hairs here, the point is to feel the financial impact your child will create and be prepared.

This is also a great time to cut back on non-essential expenses. Review your spending habits and consider reducing dining out, entertainment, or subscription services to free up more funds for your child's needs. And again, redirect these savings toward your goals.

4. Kick your savings up a notch

Consider these three savings areas while financially preparing for your child.

  • Emergencies: If you’ve put off your emergency fund up until now, you might want to consider kicking it up a notch. Aim to have at least three to six months' worth of living expenses saved in an emergency fund. Insurance can protect you in many ways, but it’s also important to have cold hard cash if something goes awry.

  • Your child’s future: Your children have the power of time on their side, take advantage of it! You can open a 529 college savings plan to start saving for their higher education expenses, or a custodial brokerage account. By starting early, you can contribute a little amount of money and allow compound interest to do the heavy lifting.

  • Your future: Oftentimes, the arrival of a little one can push your needs to the back burner. While understandable, it’s important to push back against this. You’ll want to take care of yourself in the short term (through a daily self-care routine) and ensure you’re taking care of your future self as well. Your retirement goals should coexist with your child’s financial needs.

5. Consider your career plans

Starting a family can shake up your current career trajectory and goals. Carefully consider your career plans (while also giving yourself options and grace).

Maternity/Paternity Leave

Carefully review your (and your partner’s) employer's policies on parental leave, and find out if you're entitled to paid or unpaid leave and for how long. Determine how much time you plan to take off and calculate the potential impact on your income and consider setting aside additional savings to cover this shortfall.

Work-Life Integration

This is one of my favorite topics to talk about because it’s a struggle many millennials are facing (often in silence). Achieving work-life integration requires you to set realistic expectations for yourself and your family, create a schedule, and seek support from your family, friends, and childcare providers. Self-care and space to adjust are also crucial during this season.

You may have one idea of what you want life to look like once your baby arrives and then completely change your mind. You may decide you want to work a flexible, part-time job and stay home with your baby. Or you may decide you want to go to the office full-time. There’s no right or wrong decision, it’s simply about what works best for you and your family.

Connect Your Career and Money with AncHER

As a money and career coach, I recognize that we’re holistic beings. I help individuals and families find ways to integrate their personal lives into their finances and careers.

Money and career are deeply intertwined, as the success of one can impact the other. A successful career can lead to higher earning potential while managing money effectively can lead to greater financial stability and the ability to invest in one's career.

On the other hand, financial stress and debt can impact career choices and job performance, limiting career growth and opportunities.

At AncHER, I help individuals navigate these interconnected aspects of their lives, providing guidance and support to help them achieve financial and career success. Book a discovery call with me today to get started!

5 views0 comments

Bình luận

bottom of page