7 Best Financial Tips for New Parents

While it has been said that you should be cautious and prepared for every circumstance, many people out there tend to neglect their finances until they experience a significant life event. Out of all the changes you can see in your life, becoming a parent is considered one of the best transformations you can go through.

Sure, the birth of your first child is meant to bring the utmost joy and bliss to your life. However, have you considered the other side of this phase? Welcoming a child is a massive financial responsibility. Right from the medical bills till the time your child gets married, you have to bear nothing but expenses. Thus, it is highly recommended that you prepare yourself financially before you embark on the journey of becoming a new parent.

So, whether you are planning your first child or have already conceived, this post contains some of the best financial tips for new parents that you must not overlook for a smooth ride.

Money Management Guide for New Parents

Do you think your finances are haywire while there is a baby on the way? Don’t fret! Follow these below-mentioned financial tips to plan and stay ready.

1. Start with Creating a Budget

You can begin the road to financial freedom by analysing personal cash flow. Jot down every source of Income that you have and compare it to the monthly expenses. Make sure you adjust the expenses to account for the extra costs of raising a baby. Some of the major expenses with a baby include childcare, clothes, formula, diapers, furniture, and more. Also, once you have brought a baby to the world, you will be surprised with unanticipated costs.

While some expenses could be a one-time investment, others could be recurring. It will be extremely beneficial if you can figure out the upfront costs that could hit your wallet. Hence, to always stay up to the mark, start with budgeting everything. You can even use some of the Best Budgeting Apps to comprehend adequate allocation.

2. Create an Emergency Fund

One of the most recommended financial tips by experts is to set aside emergency funds. This amount should be equal to at least three to six months of your expenses. Also, make sure you don’t access this fund unless you are facing a significant, unanticipated expense, fell ill or are unemployed.

The best place for the emergency fund is in easily accessible, liquid accounts, such as an interest-bearing Bank account or a standard Savings Account. Such an account can offer some return on the deposit while you are saving for the future.

Best Liquid Funds to Invest

3. Start Investments for New Objectives

Once you have welcomed a baby, your financial objectives would need more attention. For instance, once they turn four, you will have to get them admitted into a school. So, start Investing for child's goal from the beginning itself.

Since this responsibility cannot be delayed, you must make sure that you have the correct amount of money. One of the smart ways to save for this goal is by choosing a right Mutual Fund. Identify the monthly investment amount you can pay along with the tenure. With such an account, you will get the interest rate idea that you will be earning on the invested amount.

To get better help, you can use this Fincash calculator to find an estimated long-term growth rate of a specific amount in a certain time period.

Best Mutual Funds for Long Term Goals - For 5 years & above

4. Consider Life and Disability Insurances

Proper health insurance is important. However, you must also consider disability and Life Insurance. With life insurance, you can pay for a variety of things, such as education, wedding, mortgage, etc. It can even secure your family by ensuring the availability of financial resources if you are not around. Disability insurance is another significant help at times when you or your partner turn incapable of earning because of an injury or illness.

While there are chances that your employer might have provided these insurances, ensure that it is enough to cover important expenditures, such as household expenses for a specific time period, childcare, debt, and more.

5. Make a Legalised Will

Believe it or not, creating a legalised will beforehand is one of the best financial decisions you can take. At the time of an untimely death, it is important to have all the arrangements for your children. With a will, you get a plan for the division of assets. Apart from that, it can also help in designating a legal guardian for your child(ren).

You can talk to your attorney to ensure every part of the estate planning is accurate, such as power of attorney for health care and financial decisions, beneficiary designations, and more. Your lawyer can help you comprehend if setting the trust is a fruitful step for your objectives and situation or not.

6. Add your Child to the Health Insurance Plan

If you have thought that your health insurance provider may contact you for this matter or automatically add your newborn to the insurance plan, know that it doesn’t work this way. However, you still have a chance in the form of an enrolment period. During this period, you can easily make changes to the health policy or get enrolled in a new one. Most insurance agencies generally ask you to add the newborn within 30-60 days after delivery.

7. Save for your Retirement

Ideally, new parents are so much involved in children and their expenses that they don’t pay attention to their future. Planning early for retirement is still a very new idea, especially for private employees. But in today's time, it is essential to start Retirement planning right from the time you start working. Also, as parents tend to give priority to saving more towards the child's (ren) education, keeping a balance between multiple savings could be extremely difficult.

If you are stuck in a situation where you have to choose one, keep in mind that there are always financial aids available for college education. But, you won’t find any such help for your retirement. So, start saving for your old age now.

Wrapping Up

Undeniably, a lot of effort is invested into raising a child. Be it proper education or nutrition; you must take care of every need cautiously. And, mind it, nothing ends there. You will also have to ensure that their future is adequately secured.

To look after such massive responsibilities, you must be financially disciplined in all the years to come. While you cannot always control every other situation, you can surely take some steps to set a contingency plan for several financial obligations that may leave an impact on you in the future. So, make sure you create long-term Financial plan and objectives that will help you accomplish financial stability for the entire family.