Five Money Moves New Parents Should Make Now

Caring for your bundle of joy may cost more than you think. We’ve got strategies to help

You probably don’t need estimates from government agencies to point out just how pricey bringing up little ones can be. Even before you factor in college tuition and travel team sports, young children can cost a bundle for working parents.
Monthly daycare expenses and later summer camps often set you back as much or more than a mortgage payment. That’s why planning is key when figuring out how much more you will need to spend (and save!) every month moving forward with a baby on board.

You need a new budget

If there was ever a time to check in on your monthly spending plan, or start one from scratch, it’s when you welcome a newborn. Adding a child to your household can mean hundreds a month more in expenses. You need to determine where the money will come from, and likely where you can begin to trim other expenses. To prepare a new budget, go through your old one line by line and ask yourself where you can spend less. Dining out? Work clothes? Subscription services? (If one parent plans to stay home, some insurance costs could go down and you’ll likely save on your wardrobe and commuting.) Now take your new budget and add in estimated expenses related to the baby. If you plan to return to work, find out how much childcare or nanny services cost in your area.

Build up your emergency fund

When a new baby arrives it’s time to expect the unexpected. That means you should strive to sock away three to six months worth of living expenses, or considerably more, in a separate FDIC-insured savings or money market account. If you recently depleted your savings, don’t worry. Now is the time to begin building it back up, moving a set amount of money every week or month to the separate account so you won’t be as tempted to spend it on diapers and formula and take-out.

Consider more life and disability protection

Increasing the number of people who depend on your income raises the need for more coverage if something happens to you or your ability to earn in the future. Generally, start with term life insurance, which is the only way most new parents can buy as much coverage as they need. Because many people are having kids later in life, you may still need coverage when your 20- or 30-year term expires. One way to deal with that is by converting all or part of your policy to permanent insurance. Another is by replacing a 20- or 30- year level term policy with another halfway through your first term. Make sure to check with your employer for any life and disability insurance benefits you may be eligible for first — they tend to be the most cost-effective way to get started.

Create or update your will

While no one likes to think about death, having kids means you need a will. Why? A will is the only document that allows parents to name guardians for their children. That means you will be able to choose who will take care of them if something happens to you. When you don’t have a will, the choice could be up to the courts in your home state. If your financial situation isn’t complicated, an inexpensive will can be created on a website such as LegalZoom. If you have more assets, it’s better to have an attorney develop a basic estate plan for you and your family.

Focus on your health insurance

Moving from a single to a family health care plan at work can add several hundred dollars a month to your expenses. If you are married and your spouse is on a different plan, compare benefits to see which option offers the best coverage for the lowest cost. If you can’t afford health insurance, visit to learn more about the Children’s Health Insurance Program (CHIP) or call 1-800-318-2596.

With reporting by Casandra Andrews

Jean Chatzky

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