6 Financial Tips for Soon to Be Parents

Family Finances

Nursery? Check.

Car seat? Check.

Lots of cute clothes and tiny socks? Check.

How about an updated financial plan?

It’s definitely not the most exciting part about having a baby, but being financially prepared is important. While the choice to expand your family shouldn't be reduced to merely a financial decision, money can't be disregarded completely. 

Here are six tips for soon-to-be parents:

1. Begin Budgeting for a Baby

You may or may not already have a monthly budget, but without a doubt, your everyday expenses are going to look very different with a new baby. Be sure to consider the costs of things like:

• Food or formula
• Medical care, including the possibility of higher insurance premiums
• Diapers and wipes
• Clothing, toys, blankets, and other supplies
• Childcare

If you’re new to budgeting, there are plenty of websites and mobile apps that can help you track your monthly expenses. Factoring these new costs into your spending plan can help you spend less time worrying about money and more time focusing on your little one.

2. Ramp Up Your Emergency Fund

If you don’t have an emergency fund yet, now is the time to start one. The purpose of an emergency fund is to provide a financial cushion in the event of something unexpected, like costly home repairs or an illness or disability that leaves you unable to work for a period of time. As a parent, you may also need to take off work if your child becomes sick or needs to go to a medical appointment. An emergency fund can help you make up for any lost wages until you are able to return to work.

As a rule of thumb, you should save up enough to cover 3-6 months’ worth of expenses. Start small by setting more manageable goals for yourself, such as saving $1,000 for each member of your household, and you’ll be there in no time.

3. Prioritize Retirement Savings

If you have to choose between saving for your child's college and saving for retirement, choose retirement. Your child will likely have more than one option to pay for college - including scholarships, loans, work-study programs, and grants - but you can't make up lost retirement savings. 

4. Adjust Your HSA Contributions

HSAs, or health savings accounts, are often an underappreciated pre-tax benefit that can be used to pay for a variety of current or future healthcare expenses for you and your family. The best part, any money you contribute and don't use in a given year will roll over to the next year. The money in your HSA account can be used for a wide variety of health-related products and treatments, including doctor's fees, breast pumps, and even baby sunscreen!

5. Consider Participating in a Dependent Care FSA

Similar to an HSA, a dependent care FSA is a pre-tax account you contribute to that's sponsored by an employer. The maximum contribution in 2024 to a dependent care FSA is $5,000 for families. Because these accounts are funded with pre-tax dollars, using them can lower the cost of eligible child care expenses and helps lower your total taxable income. Unlike HSAs, dependent care FSAs do not carry over to the next year, so whatever you don't use, you lose. Because of this, be sure to carefully budget for the amount of child care expenses you actually have.

6. Update Your Insurance and Estate Plan

Adding a baby to your health insurance is essential, but you may want to consider other types of insurance as well. Life insurance can help protect your family by ensuring that your loved ones will be financially secure in the event that you or your partner passes away. Disability insurance (which is often offered as a part of employee benefit packages) can also provide security in the event that one or more of the adults in your household is unable to work for a period of time. Talk to your HR representative at work or consult a licensed insurance agent to find out what options are available to you. 

Now is also a good time to either create a will or update your existing one. In addition to stating how your financial assets are to be distributed, a will can also include provisions for who will serve as guardian for your child if you and/or your partner pass away or become incapacitated. A licensed attorney can help you to create a plan that meets your needs. 

The content provided in this blog is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by JVB. JVB does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. JVB does not warrant any advice provided by third parties. JVB does not guarantee the accuracy or completeness of the information provided by third parties. JVB recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.

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