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Along comes baby
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Congratulations on your bouncing bundle of joy!  Welcoming a new child is an exciting time in life. Of course the event will have a significant impact on your finances. The average cost of raising a child to 18 exceeds $200,000 according to a 2012 USA Today article. Then there is college.  (Given that 30% of this reflects the cost of housing—and you have to live somewhere anyway—it is not as dire as it may seem.)

If possible, begin living on the post baby budget now. Estimate the monthly cost of daycare, diapers, clothing and health insurance. Set that money aside now to get used to what living on less feels like. This will also help you determine if you can afford to live on one income should you choose to do so.

Review your life insurance needs. Make sure you have sufficient coverage to raise your child to at least age 18. You may need additional insurance if your spouse plans on leaving the workforce.

You will need a Will.  If you already have one, it must be updated.  Consider who you would entrust to raise your child if you cannot and who should manage the money necessary to do so.  They do not have to be the same person.

All things baby are adorable!  Consult with experienced parents about what you really need to care for your child.  Consider borrowing necessary items or purchasing them at consignment and thrift shops, etc.  The money you save can be added to Emergency reserves or saved for an education.

Be sure to add your child to your health insurance plan.

Do not wait until the last minute to find a day care provider.  If your employer offers one, consider funding up to $5000 in day care expenses via a Dependent Care Spending Account.  This allows you to use pre-tax dollars for some of these costs.

Many parents hope to help pay for their children’s higher education.  While this is a wonderful gift, unless your children are your retirement plan, you must prioritize securing your own future first.  Although not ideal, your children can borrow to get an education.  You cannot borrow to retire.


  • Financial Aid formulas do not assess qualified retirement assets in the Expected Family Contribution—they do include home equity.
  • Your child/children may join earn scholarships, join the military, or decide not to go to college.
  • If you have done a good job putting money away for retirement, you may be able to scale back during the college years and pay tuition from cash flow.

NOTE:  There are other things you can do to help your child get a secure financial start in life, such as help them repay loans after they graduate, permit them to move home in order to build an Emergency Fund before striking out on their own and/or care for their children once they start a family.


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