A new baby can really impact your finances. Here is what financial advisors want you to know so you can prepare your family budget for your new arrival.

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Having a baby is a huge life transition—physically, emotionally, and yes, financially. As you go about planning for your baby's arrival, prepare your family finances, too—you don't want to underestimate the first-year costs of your baby.

"Turn to any social media channel, and you'll see anything from gender reveals to baby showers and even 'sip n' sees,'" Jamilah McCluney, a financial advisor, tells Parents. "As a financial advisor, I believe it should take just as much pre-planning financially, if not more, to ensure you are financially prepared for your new little one," says McCluney.

An image of a baby holding a jar with money.
Credit: Getty Images.

The USDA reports that it costs an average of $13,741 each year to raise a child in the U.S. from birth to age 17—and that's not including college tuition. The number goes up to over $16,000 per year if inflation costs are taken into consideration, so you might want to plan ahead and start saving as soon as you can.

"It's important to implement these pieces early. The sooner you start, the more time you have to accumulate funds and growth," advises McCluney.

Here is what financial advisors want you to know before you welcome your new baby, so you can rest assured that you're as financially prepared as possible.

Annual daycare costs may be higher than you expect.

The cost of child care continues to rise, so make sure you start saving for daycare expenses. Annual child care costs for an infant are about $16,000 according to the latest data by the Center for American Progress—about $1,300 per month. The cost of child care can be even more expensive in cities, at around $20,000 annually.

Michelle Young, a Minnesota-based financial advisor for Ameriprise, says having a monthly savings plan can help. "One recommendation would be to practice saving monthly daycare expenses in a separate savings account as a family when you find out you are pregnant—and then you will get used to the extra expense before it happens," says Young. She says the money you save in this account can be used for other unexpected baby expenses as well.

Understand the benefits available to parents at your company.

If your company offers benefits for parents, have a good understanding of them so you can take advantage of these company benefits as you get ready to welcome your baby. Young says some of the benefits to be aware of or inquire about would be parental leave policies, whether you will need to use short-term disability, any childcare benefits that are offered, and dependent care savings accounts that can help reduce your taxable income.

If your company provides health benefits, review the policies and rates for family healthcare plans, since you will be adding your new baby to your insurance. "If there are multiple health plans between the parents, decide what health plan will work better for your family's needs," says Young.

If you have a Health Savings Account (HSA)—use it.

Speaking of health benefits, if you have a high-deductible health plan (HDHP) with an HSA, you should make use of it. "They are an incredible savings vehicle that are underutilized," says Mike Hakimi, certified financial planner and founder of Black Dog Financial Planning, tells Parents. See if your company matches or makes contributions to your HSA as well for more savings. With HSAs, pre-tax dollars are taken out of your paycheck and put into your HSA where they will grow tax-free and can be invested or used for medical expenses.

"This can be a huge tax savings, especially considering the high cost of having a child. Unlike other medical savings accounts such as an FSA, an HSA is not 'use it or lose it,'" says Hakimi. The money in your HSA account will roll over into the next year, and you can take it with you if you ever decide to leave your company.

If an HSA or other tax-advantaged account is not an option for you, Hakimi recommends starting a sinking fund. A sinking fund is a savings account that is separate from your emergency fund and can be at your primary bank or in a high-yield savings account online. Hakimi suggests starting one as soon as you find out you're having a baby or even when you start trying.

"A bi-weekly deposit of $250 for the next eight months would build up to approximately $5,000. This could cover a good chunk of the medical expenses," he explains.

Save for your child's education.

It's no secret that college tuition is expensive, so start your savings plan early. "It's never too early to start investing for college," Jeanne Berger, private client advisor at J.P. Morgan Wealth Management tells Parents. Both Berger and Hakimi recommend starting a college fund with a 529 college savings plan.

"The invested money can grow tax-free, and if used for college expenses, can be distributed tax-free. Depending on what state you live in, there might be a state tax deduction or credit too," explains Hakimi. You will have plenty of expenses to save for as a parent-to-be, but make sure you're saving for your child—even if it's not specifically a college fund.

"Save for emergencies, save for new home purchases, save for their upcoming education (in a 529 or other financial vehicles), but save, nonetheless," advises McCluney.

Keep the bigger financial impact of having a baby in mind, and plan ahead.

Once again, plan ahead and start saving early for all the expenses (unexpected and otherwise), that come with having a baby.

"Most people forget about the size of the car, the number of rooms in the house, and sometimes the size of the dining room table in the early days of planning for kids," says Young. She says to review financial changes that will come up with your new addition, and to have a plan.

"As a mom of a five-year-old, three-year-old, and five-month-old, I can tell you that with a new baby, your expenses will probably change, and you may want to think about new goals to incorporate into your financial strategy," says Berger, who recommends meeting with a financial advisor to prepare for these changes.

Come up with a budget for anticipated expenses, up your savings, make sure all of your important financial documents are updated—and you (and your finances) should be in good shape for baby.