Screen Shot 2015-08-13 at 9.19.42 PMIf you clicked on this article, there’s a good chance that you’ve either A) recently had a baby or B) recently decided that you would like to have a baby at some point. Congratulations either way.

Having a baby is a life-changing experience. Babies are sweet, cute and cuddly. They’re also ravenous resource vacuums that will slurp up every last nickel of your disposable income, smiling and cooing along the way. That is, if you let them.

In the following article, we’ll try to help you figure out a way to keep a few bucks in the bank after your family gets a visit from the stork.

Step 1: Do a Financial Assessment and Realign Your Expectations

When it comes to having a baby, you will probably never have enough of anything: formula, diapers, blankets, those little nose-sucker things, you name it. Same goes for money. Unsure of what you really need? Click here.

According to the USDA, it will cost a middle-income American family around $241,000 to raise a child from birth to 18 years old. Oh, and that doesn’t include the cost of a college education. If you are a middle-income American family, you’re going to need to make some serious adjustments to how you allocate your financial resources.

If you’re a spreadsheet wonk, there’s no harm in doing a family finance status listing out your current income and obligations with added projections for stuff you’ll need when the baby comes. Just know that, in the words of German military strategist Helmuth von Moltke the Elder, “No plan survives first contact with the enemy.” Obviously, your baby is not your enemy, but it will be difficult to gain a firm grasp on what your expenses will be until you have a few weeks of parenthood under your belt.

Take one of those sleepless nights you’re sure to have and update your household finances to account for the baby expenses. You need an accurate picture of what’s coming in and what’s going out. You want to make sure that, despite the added baby costs, you’re still have some money left over.

If you need to trim some expenses to do that, so be it. You don’t want to be living paycheck to paycheck with a newborn if you can trim some budgetary fat. You also don’t want to rely on credit cards to make up the difference between your income and expenses.

Step 2: Save for What’s Important

Everything your baby requires can be organized into short-, medium- and long-term needs.

  • Short-term needs are what your baby requires every day. This includes food, diapers, wipes and all of your “maintenance” items. Since you’re purchasing these regularly, you can’t really save for them.
  • Medium-term needs are what your baby will need a few months to a year from now. This includes different clothes, strollers, car seats and any number of goods that your growing kid is sure to outgrow. It’s good practice to save regularly for stuff you’ll need down the line. Try opening a savings account dedicated to medium-term baby needs. If you put a few bucks in there every week, it can greatly defer the cost of surprisingly expensive items like new beds, furniture and toys. You can even use it for planning the bigfirst birthday party. The important thing is that you’re regularly putting money away to help alleviate the never-ending list of goods and services your bundle of joy requires.
  • Long-term needs are things that your child will need a few years from now. Some notable and costly expenses include a college education, orthodontia and perhaps a vehicle. These are future costs that could benefit from a more aggressive savings plan or the help of investments. Saving for college is important, especially given how fast tuition rates are rising. Click here to learn more about the best ways to save for your child’s future educational expenses. For other major expenses, consider opening an investment account to help your money grow. With regular contributions, some time and a little bit of luck in the financial markets, you should be able to absorb large future expenses more easily.

Step 3: Make It Automatic

Good habits, like saving, are easier to get into if they are minimally intrusive. Just like you may have automatic bill payment set up to minimize the hassle of maintaining your finances, try to make saving for future child expenses just as automatic.

If you decide to set up medium- and long-term savings accounts for your kid’s future expenses, payroll deductions are a great way to keep it going regularly. After a while, you don’t even notice the money missing from your paycheck, and those seemingly small drops can quickly fill a bucket of money that your child will need some day.

Making the financial adjustments after adding to your family can be a daunting task. But with an accurate understanding of your household finances, a clear picture of what your child may need a few months and years down the road and the diligence to start saving regularly, you should be well-prepared to tackle whatever your child throws your way.


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