Becoming a parent is a life-changing moment. However, raising children often comes with financial challenges. From baby supplies to medical bills, the costs of raising a child can quickly add up and drain your bank account.
First-time parents may feel overwhelmed by these expenses, but with careful planning and smart financial strategies, it’s possible to minimize the financial burden. Here are some money-saving tips to help you prepare.
Childcare costs
The cost of raising children continues to increase year by year. According to Bankrate research, the average cost for a child in the United States from birth to age 17 is an estimated $313,939, or approximately $18,000 per year. This figure includes expenses such as housing, food, child care, education, and health care.
Understanding these costs will help you budget more effectively and prepare for the future. The key is to create a financial plan that addresses your immediate needs while anticipating future expenses.
“To minimize stress, it’s important to start preparing in advance,” says Rachel Caballero, community development and public relations manager at TruWest Credit Union. “Re-evaluating your budget and identifying missed spending, such as at-home beauty services or unused services or subscriptions, can help you save even more for your new life.”
How to save money on baby basics
The birth of a newborn often requires a long list of essentials such as diapers, clothing, and baby supplies. These costs can quickly add up, but there are ways to save money without sacrificing quality.
buy second hand items
Many baby products such as cribs, strollers, and high chairs are gentle to use and cost a fraction of the cost. Find quality used items through online marketplaces, thrift stores, or parent groups.
“We expect parents to spend too much money on baby clothes. Babies rarely wear clothes. They are swaddled 80 percent of the time,” said Christine Landis, founder of Peacock Parent. All you need is a basic onesie and socks. Don’t buy baby shoes. Sure, they look cute in one photo, but I would spend that $30 on newborn care. I would like to use it at home and as a sleep trainer.
borrow from friends or family
If you have friends or family members with young children, ask them if they have any baby items they no longer need. Many parents are happy to lend or gift something that their child has outgrown.
Consider generic brands
Diapers, wipes, and baby formula are available in generic or store brand versions and are often of comparable quality to name brand products, but at a significantly lower price.
Create a registry and follow the essentials
When creating your baby registry, focus on the items you really need. Avoid unnecessary gadgets and luxuries in favor of essentials.
Tips to save money on child support
Childcare is one of the biggest expenses for new parents. However, there are strategies that can help you save money on childcare costs.
Consider a Dependent Care Flexible Spending Account (FSA)
Many employers offer dependent care FSAs. This allows you to set aside pre-tax amounts to cover eligible child care expenses. This can result in significant tax savings.
Consider nanny share
In a nanny share, two or more families split the cost of a nanny. This arrangement is more affordable than hiring a family nanny and can provide more personalized care than traditional day care.
Get family support
If you have family nearby, ask if they can help with childcare, even if it’s part-time. This can significantly reduce formal childcare costs.
“If you can’t afford full-time childcare, get creative with how you and your family cover childcare,” says Annie Cole, money coach and founder of Money Essentials for Women. “For example, families can commit to certain nights. Consider joining a parent group and swapping childcare roles. You and your partner can schedule a day or part of the day for childcare. You can request a flexible schedule from your workplace to free up some days. Also, discuss potential child care benefits with your employer.
How to save on your child’s medical costs
Health care costs can add up quickly, especially during early childhood when routine doctor visits, immunizations, and unexpected illnesses are common. Here are some ways to reduce these expenses.
Choose the right health insurance plan
Carefully consider your health insurance options before your baby is born. Make sure your plan provides comprehensive coverage for prenatal, postnatal, maternity, and pediatric care. Compare deductibles, copays, and out-of-pocket limits to make sure you’re choosing the most cost-effective option.
Explore government nutrition assistance programs
Many states offer programs such as the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to help low- and moderate-income families with food costs. Check out programs in your area to see if you qualify.
Get free or low-cost medical services
Many local health departments and clinics offer free or low-cost services such as immunizations and health exams for children. Take advantage of these services and save money on your daily care.
Use an in-network provider
Choose a health care provider within your insurance network to minimize your out-of-pocket costs. Also, consider finding a pediatrician who offers flexible payment plans or accepts Medicaid if needed.
Create a Health Savings Account (HSA)
If you have a high-deductible health plan, you can open a health savings account. Contributions to an HSA are tax-free and can be used to pay for your child’s qualified medical expenses.
Tax measures to ease the burden on new parents
When you become a parent, you are entitled to several tax breaks that can help you save money. Here are some tax developments to consider.
Apply for child tax credit
The Child Tax Credit allows parents to claim up to $2,000 per qualifying child on their federal tax returns. Be sure to claim this credit to reduce your tax bill.
Take advantage of the earned income tax credit
If you have a low or moderate income, you may qualify for the Earned Income Tax Credit and receive a large tax refund.
Use your dependent care credit
In addition to the Dependent Care FSA, you may also be eligible for a tax credit if you pay for childcare services while working. This credit is worth up to 35% of eligible child care expenses, depending on your income.
“Child support and possibly other child-related expenses may be helpful on your tax return,” says Dawn Marie Joseph, founder of Estate Planning and Preservation. “The IRS website has a wealth of information and is very easy to use. Contact your tax professional to find out what deductions are available to you.”
Financial mistakes new parents should avoid
Managing your household finances as a new parent can be difficult, and many people make common mistakes that can negatively impact their financial future. There are some pitfalls to avoid.
budget not achieved
Not creating a budget can lead to overspending and financial stress, especially when you start adding in all the additional costs associated with having and raising a child. Be sure to track your income and expenses to ensure you’re living within your means and saving for future needs.
“Expenses should be tracked in a budgeting application or at least a spreadsheet,” says Doug Carey, CFA, president and owner of WealthTrace. That way, you can continue to budget effectively for your new child. ”
Not prioritizing retirement savings
While it’s natural to want to focus on your children’s financial needs, it’s important not to neglect your own retirement savings. Make sure you are contributing consistently to your 401(k) or IRA while saving for your child’s future.
“Bringing a new baby home will increase your expenses, but that doesn’t mean you should forget about saving for retirement or contributing to an emergency fund,” says Joseph. “If you have to reduce these contributions in the short term, do so, but try to get back on track as soon as possible.”
Ignoring emergency savings
Having an emergency savings fund is important, especially if you have a family. Be sure to save at least three to six months’ worth of living expenses in an easily accessible account in case of unexpected expenses such as medical emergencies or unemployment.
“This is very important before the baby is born,” says parenting expert and parenting author Tammy Gold. “Evaluate all your current costs, predict future expenses, and see where you can adjust your budget. Talk to your financial planner or bank representative to develop some savings strategies. Please stand up.”
conclusion
Becoming a parent is a rewarding experience, but it also comes with significant financial responsibilities. By taking the time to plan ahead and make smart financial decisions, you can manage the cost of raising a child without going over your budget. With the right strategy, you can ensure your family’s financial future is protected.
