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With all the joys that come with expecting your first child is a lot of new stress. Considering all the responsibilities that come with a baby, this is no surprise. However, you would be surprised at how few parents plan ahead on some key elements. Perhaps one of the most important and often neglected aspects of childrearing are your finances. Coming up with a financial plan is crucial to relieving stress while raising a child, especially if you’re a small business owner or serving in the military.
It’s no secret that children are expensive. In fact, CBS found that the average cost of raising a child for a middle-class family is nearly $14,000 annually. That’s a large increase to a yearly budget. Without proper planning, the stress of this new spending will wear down your physical and mental health.
Learn to Budget
Coming up with a realistic and doable budget is the cornerstone of any financial plan. Before the baby comes, keep track of your spending for about a month. This will help you see where your money is going and what you can cut back on. You’ll direct the money you save toward your new baby budget or put it in savings.
Calculating your baby budget can be a bit tricky, especially as a child’s first year can be their most costly. There are many large one-time expenses such as the crib, stroller and car seats you will need in addition to the monthly necessities such as diapers, food, clothing and toys. To help you get a better idea of what your budget should be, try using Baby Center’s cost calculator.
Read next: 9 Ways to Make a Budget - And Stick to it!
Start your practicing your new budget during the remaining pregnancy months. Not only will this help you adjust to your new spending habits, but also you should take advantage of saving and building up your emergency fund. Experts recommend having three to six months worth of expenses in a savings account in case you or your partner lose their job or one of you gets sick or injured.
Even financially savvy parents already with an emergency fund should keep in mind that adding a child to your family will increase your monthly expenses. Use the new monthly budget you calculated as a reference for how much you should have in savings.
Plan For the Future
Truly smart money managers do not plan just for next month or even next year, they’re looking decades down the line. If you’re like most parents, you’re probably already thinking about college for your child. It is never too early to start a college savings account in their name. Make sure you do your research and find an appropriate program designed to make sure every penny you save goes toward their education. You do not want them to accidentally miss out on any finical aid or end up owing thousands of dollars in taxes.
While you’re planning their future, do not forget to plan for yours. Keep putting as much money as possible toward your retirement plan. As tempting as it may be, there is no point in putting all your money toward your child now if they are going to need to support you in your old age.
Smart Money Management
Do not underestimate the power of planning. Staying on top of your finances from the start will reduce stress and increase happiness. This way, you get to enjoy all the ups and downs of parenting without money stress weighing you down!
This communication is provided for informational purposes only. It is not intended to be an advertisement, a solicitation, or constitute professional advice, including legal, financial, or tax advice, nor is StreetShares providing advice on any particular situation.