6 Money Matters You Should Handle Before Baby Arrives

piggy banksPlanning on starting a family? Get ready to start spending: According to a report released by the USDA, the average cost of raising a child up to the age of 18 is $245,340. (And that's not including college tuition!) With numbers like that in your future, you definitely want to make sure you're starting your family off on the right foot financially.


We consulted with personal finance expert Liz Weston of Nerdwallet.com to find out which money matters parents should focus on before baby arrives (because trust us, you'll be a lot busier after that little one comes along! However, it's never too late to get on track).

Even if you're pretty financially savvy, you might be surprised by what the experts say are the most important things to do when budgeting for a baby.

1. Start an emergency fund.

For new parents, "the first priority is an emergency fund," Weston tells CafeMom. "We're really rediscovering how important that is. You'd think it's a basic backbone, but so many people don't have it." And with all the unexpected expenses that come with having a child, it's safe to say that at some point you'll need a buffer. Many experts recommend having enough in the bank to cover three to six months of bills and expenses, but the most important thing is that you have something. "Even $500 is a good start," says Weston. "Whatever you can do."

2. Be careful about startup costs.

Too many first-time parents are overly concerned about having brand-new baby clothes and supplies, Weston says. "You can easily spend $6,000 or $7,000 on gear if you're not careful," she notes. Instead, look for sales and bargains, and open yourself up to the idea of gently used items (especially if they're donated from friends and family, who can vouch for their safety and quality). Also, remember it's okay to cash in on Grandma's natural inclination to spoil her grandchild. "That's what they're there for," says Weston.

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3. Look into 529 college savings plans.

College might seem like a long way off, but as the mother of a high school freshman I can tell you that the next couple of decades are going to go by a lot faster than you think. Weston recommends looking into 529 plans, which are state-sponsored investment plans that allow you to save for college tax-free (and sometimes include tax benefits). Even $25 a month is better than nothing, Weston says. You might also suggest baby shower guests contribute to the 529 instead of giving gifts. "You get way too much stuff you never use -- $25 from a bunch of people into that 529 is going to do your kid a lot more good in the long run," says Weston.

4. Start thinking about retirement (really!).

As important as saving for college might be, saving for your own retirement is even more important, according to Weston. After all, without a solid retirement plan in place, that new baby just might end up having to support you someday! Start socking away now, and consider a Roth or IRA account.

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5. Ditch credit card debt.

The last thing you'll want to deal with when supporting a new family is paying down old credit card debt. If you find that you're having trouble paying down debt on your own, consider looking into debt relief options such as debt consolidation, settlement, or management, or even bankruptcy. "If your consumer debt equals half or more of your yearly income, at least consider talking to a bankruptcy attorney," advises Weston. (Not-so-fun fact: Having a child is the "single biggest predictor of filing for bankruptcy," says Weston.)

6. Take out a life insurance policy.

You don't even want to consider the possibility about something happening to you while your child is young, but anything can happen -- which is exactly why you want the reassurance life insurance provides: making up for everything from lost income to childcare cost to mortgage payments. Talk to an insurance agent to see which type of life insurance is right for you (term or permanent, for example).

All of this probably seems pretty overwhelming, but hey, so is being a parent! The good news: It'll be a lot less overwhelming when you have money in the bank.


Image via Ken Teegardin/Flickr

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