Financial planning tips for parents

A new child will undoubtedly bring about a world of change—especially when it comes to your day-to-day budget and plans for the future. Being responsible for a child requires an adjustment across the board, both for new and experienced parents alike. 

As the cost of everything from car seats to college continue to rise, it’s easy to feel overwhelmed and financially challenged. That’s why having a plan—and some flexibility—can help take some of the pressure off, and help you get started on the right foot. 

You’ve probably already been prepping and planning for months. But what can you do to financially prepare for a new arrival? Check the following off the list: 

• Check your insurance and family leave policy at work. Check with your employer about time off for maternity and paternity leave, including that for adoption. Make sure your health plan covers your and your child’s needs, and try to set aside funds for medical bills that may not be covered by your health insurance. 
• Budget for the new addition to your family. Make a list of current expenses, as well as anticipated expenses. These include necessities like diapers, nursery furnishings, food or formula, clothing, childcare, and childproofing supplies. This will help you prioritize spending in advance, as well as shape a plan for after the baby is born. 
• Expect the unexpected. You can’t budget for everything. Unanticipated expenses will always arise with young children, such as extra trips to the doctor or last-minute childcare. Make sure you have some savings set aside for these unexpected expenses. 
• Buy used, carefully. Shopping at garage sales and accepting hand-me-downs are great ways to save on baby clothes and toys. But be sure to check out strollers, toys, and equipment with the Consumer Product Safety Commission or (800-638-2772) to make sure the model is still safe and secure. 

• Keep track of spending. Tracking receipts and purchases will help control where, when and how you spend money. If you use a financial app, create a category for child-related expenses and keep an eye on it. That awareness can make staying within financial limits easier. Also save receipts for items like clothing and toys that may need to be returned. 
• Prepare for ongoing child care costs. Parents can expect to spend as much as ten to 20 percent of their income on child care. If you work for a company that offers a flexible-spending benefit, you can stash part of your pre-tax salary in a child-care account. If not, you can claim the child-care credit on your tax return, reducing your taxable income. 

There are also a few things you can do now to financially prepare kids for the future.

• Set up accounts that will grow along with them for a better financial future. There are options for tuition plans you can start contributing to right away—and the sooner you start, the better.
• Whether you opt for one of the flavors of 529 plans, a Roth IRA or a trust (or a combination of any), the key is calculating what you should set aside for the next 18 or so years. Create a strategy and start contributing early.