Becoming a parent for the first time is overwhelming enough. It would be nice if it meant you also got a break from worrying about everything else in life for a few weeks while you learned to be wholly responsible for a tiny new human being in your home, but unfortunately, that isn’t the case. While you’re simultaneously sleep deprived and exhilarated by new parenthood, it can be easy to make some financial mistakes, including the common ones below.
Failing to Make a New Family Budget
Whether or not you had a budget before, with a baby on the way or already here, it’s time to make one. There are several different things you need to consider, including childcare expenses, the cost of clothing and diapers, and the possible loss of income if one parent is not going back to work full time. If you do find that are looking for immediate funds, one option you could explore is taking out a personal loan. To help you figure out if this is a viable alternative in your situation, you can review a guide that tells you everything you need to know about personal loans.
Not Starting an Education Fund
A 529 savings account, a Coverdell Education Savings Account or something similar can all be excellent ways to save up money for your child’s education, and it provides a fund that other family members can contribute to as well. With college costs rising, it’s smart to establish one of these as soon as possible. What happens to the money in the account if your kid decides not to go to college will vary depending on the rules of the account, but you can transfer a 529 to another family member while the child can receive the money in a Coverdell account after reaching the age of 30.
Not Talking About Money
If you and your partner haven’t talked seriously about money before, now is the time to start. You need to explore your attitudes about it and think about how you want to raise your kid. Do you want to encourage them to save? Do you want to teach them how to invest? Getting on the same page now about finances can help reduce the likelihood of conflict down the road.
Not Making an Estate Plan
This is a great time to set up a trust fund for your loved ones, make an estate plan, or revise an existing one. In a will, you can name the person you want to be your child’s guardian in case anything happens to you or the other parent. While it’s true that your kid can’t inherit assets until they are 18, you might still want to take steps to make sure that assets are protected for them, such as setting up a trust. You may also want to consider taking out a life insurance policy. Be sure to calculate how much your child would need to be supported until adulthood as well as any additional costs you would want to cover, such as money for college.