As a new mom, you still be getting used to juggling all of your new responsibilities. But as you settle in, start thinking about your future, too. Your first-year down payment in diapers, day care, and baby gear leads into a lifelong investment in shoes, braces, music lessons, education ... you get the picture. But don't let money worries cloud your joy. Millions of parents find the funds they need to bring their kids up well, and you will, too. All it takes is some careful planning in a few crucial areas.
- Budget for a good life. As your kids get older, expect your cost of living to go up, not down. Clothing for teenagers costs a lot more than all-in-ones do. Plus, you'll likely need to pay for a home, new cars (with more room!), vacations, camp, and more. "Start setting aside money for these goals as early as you can," says John Frisch, of Alliant Wealth Advisors, in Woodbridge, Virginia. If your anticipated expense is at least five years down the road, consider investing the savings in a stable-value mutual fund, which should yield better returns in the long term than the bank.
- Protect your family's future. Nobody wants to think about dying, but when you have a child, confronting the idea is essential. Life insurance lets you rest easy knowing that if something happens to you or your spouse, you'll leave behind enough money for your kids. You need coverage even if you don't earn an income; since your spouse's child-care costs would be higher without you. A financial professional can help you determine what kind of insurance is best for you. Parents should have a disability policy, too, recommends Helen Modly, a fee-only financial planner with Focus Wealth Management, Ltd., in Middleburg, Virginia. That way your family is protected in case you lose your income due to illness or injury.
- Build an emergency fund. You don't know whether your next unexpected expense will be a leaky roof or a layoff. So make a list of all of your monthly expenses -- rent or mortgage, car payments and insurance, groceries, phones, utilities, babysitting, etc. -- then stash six to nine months of living expenses in a safe, liquid account.
- Save for college. Don't even bother reading the scary headlines about how much college costs. Create a college - savings goal for your child, and put away as much as you can afford each month, suggests Mark Kantrowitz, founder of finaid.org, a financial-aid site. When your parents or in-laws ask how they can help out, encourage them to contribute to the account (or suggest they open a new one). And don't panic. By the time your baby goes to college, you'll likely be earning more than you do now -- and direct aid and student loans can help pay the bill, too.
- Plan for your own retirement. Yes, your golden years are far off, but you need to start socking away money today. "Nobody's going to give you a loan if you haven't saved for retirement," Frisch says. So feed your company-sponsored 401(k) plan and open an Individual Retirement Account (IRA) or a Roth IRA. The better prepared you are for your own future, the less your sweet little baby will have to worry about you down the road.