Raising a child is absurdly expensive. According to the latest federally-provided figures, a child can cost his or her parents an average of $233,610 over the course of eighteen years – and that isn’t even accounting for private or college tuition! Welcoming a child into the world is an exciting time for any parent, but it requires some practical thinking and hard financial conversations. Here, I overview a few strategies that every single expecting or current parent should implement to secure their own and their child’s financial future.
Create a New Budget
A new baby brings new expenses. The added financial cost posed by diapers, formula, and childcare can weigh down even a solidly made budget. Keep track of your expenses, and build a budget around the actual expenses you face, rather than those you projected pre-baby. Mind you, some of the costs you encounter might not be ones you anticipated; make sure that your health insurance will provide adequate coverage for your child in the case of emergencies. The last thing you want to discover on a trip to a needed doctor’s appointment is that your insurance doesn’t extend to your baby.
Bolster Your Emergency Fund
While every adult should have a sturdy emergency fund, these tucked-away savings are vital for new parents. After all, losing your job when the only person you have to worry about is yourself is one problem. Losing your job when you need to support a child is a problem of an entirely different magnitude. Make sure that you have enough in your emergency account to cover your family’s living expenses for three to six months in case of disaster, and ensure your financial security by reducing your credit card debt.
Set Up a College Savings Account Now
It may seem odd to start saving for college when your child is still in preschool, but starting early is the only way to lessen the burden of tuition. Set up a 529 college savings account, and contribute however much you can afford every month. Your small inputs will add up over eighteen years; while it may not be able to cover the full cost of college, it should defray the overall burden and put your child in a position to graduate with a manageable amount of college loan debt.
Research Applicable Tax Credits
Knowledge is the key to financial security. Common tax credits include the child tax credit, which can give you a $1000 credit every year until your child turns seventeen, and the child and dependent-care credit, which provides qualifying filers the chance to claim up to $3000 for a single child under the age of 13. Do some research to find out which tax credits your child gives you eligibility for!