3 Pieces of Easy Financial Advice for Expectant Parents

Raising kids is not an inexpensive endeavor. You start with diapers and car seats, move into childcare and braces, and finally tackle extracurricular activities and cell phones. The U.S. Department of Agriculture estimates that it will cost a middle-income family $233,610 to raise a child (and no, this doesn’t include the cost a college education). They say there is no perfect time to start your family and that may be true. But, there is a lot that new parents can do to prepare themselves financially to welcome a bundle of joy. We have three key pieces of financial advice for expectant parents.

Savings and Budgets for a Growing Family

financial advice for expectant parentsOne way in which new parents can feel more financially secure is to ensure they have built an adequate emergency savings for the entire household. It is recommended that there be enough in savings to cover three months of total living expenses. If one parent plans to stay home after a baby is born, you may want to increase your emergency savings to cover six months of expenses.

With a reliable savings in place, the next piece of advice for expectant parents is to readdress your family budget. As a couple, you probably have a realistic budget that you can manage each month. But with a baby, there will be new expenses to include in your monthly total.

Before your baby arrives, you’ll have some upfront purchases to make including a crib, car seat, and clothes. After your baby comes home, you will also need to factor in on-going costs that can include diapers, wipes, formula, and larger clothes.

Additionally, you may need to readjust your budget to cover the costs associated with:

  • Child Care — New parents dedicate anywhere from 9% to 22% of their annual income towards childcare. These costs vary depending on where you live and the type of child care you choose (daycare center, home daycare, or in-home child care).
  • Life Insurance — It’s recommended that parents have enough life insurance coverage to be able to pay for their funeral expenses, any outstanding household debt, and loss of income to lessen the burden on the surviving spouse. As your family grows, the amount of coverage should be increased to include any costs for child care (especially if the parent who passes away handled the majority of child care expenses) and your child’s future education.

Research Health Savings Accounts

When your baby is born, you have 30 days to add him or her to your health insurance plan or 60 days if you’re enrolled in the Health Insurance Marketplace. When you apply within this timeframe, coverage for your child is applied to the day of his/her birth and going forward.

Our financial advice for new parents also includes researching whether you are eligible to open a Health Savings Account (HSA). These accounts, which are offered by many financial institutions, were created to help individuals enrolled in high-deductible health insurance plans.

The money you contribute into a HSA is pre-tax and grows tax-free, and withdrawals are not taxed. It is typically used to cover medical expenses such as deductibles and copays. New parents can determine how much to contribute to their HSA each year, but there is an annual maximum contribution for families.

Save Early, Save Often

It’s never too early to put all those checks from well-meaning relatives to work and start saving for your child’s future. With a junior membership, both parents and the child have their name on the account. As your child grows, he or she can begin to make deposits into the accounts, but only the parents can make withdrawals or transfers. In addition to saving for a first car, school trip, or college expenses, a savings account is also a great tool for teaching your child age-appropriate financial principals.

Many new parents also begin saving money for higher education when their children are still babies. There are several tax-advantage college savings plans that you can open on behalf of your child. To help you make sense of the options available to you, we’ve outlined the best ways to save for your child’s education in this blog post: Are You On Tack with Your Child’s College Savings?

Are you ready to prepare yourself financially for a new baby? Diamond offers everything you need from savings accounts to mortgage counseling to financial planning.


The views, opinions, and ideas articulated in this blog are just that, and should not be construed as financial or legal advice. The writers of these blogs are educated on the topics they are writing about, but they are in no way licensed financial advisors or registered investment advisors. Diamond Credit Union is not responsible for any actions a person may take as a result of the information they read in one of our blogs.