Becoming a parent can be a joyous occasion, but it also comes with many stresses that most new parents might not think about until after they are confronted with them, such as the cost of child care and saving for their child’s educational future.
Although new parents cannot plan for everything that life with children will throw at them, they can learn money-saving tips and incorporate them into their family’s budget to help them deal with the costs of a growing family and any unexpected purchases. Life with children is expensive, but it is also rewarding, and many simple tips can help take off some of the financial stress. To get started, the sections below provide a few money-saving tips for parents to help them provide for their family.
Invest Whenever You Can
When you become a parent, you will experience many new costs and expenses, and it may be easy to forget about your pre-baby money-saving goals. After having a child, it is essential not to forget about contributing to your investment accounts. Continue to save for retirements as best as you can, even if there are months when you can only manage to save what your employer matches. Adding money to your investment account is not a short-term gain. However, if you are strict with adding money to your investments over an extended period, you may be able to use those funds towards essential purchases, like your child’s college fund. You might also be able to use that money to pay off a mortgage or pay off debt.
Ask for Money, Not Gifts
It might seem too far away to start planning for your child’s college fund when they have just been born, but it is the perfect opportunity to start since this is a time in your child’s life when they are prone to getting gifts. Instead of asking for birthday gifts or holiday presents, ask your family and friends to give a cash gift instead. An easy way of doing so is by having them contribute to your child’s 529 plan, which they can usually access online. A 529 plan is like a retirement plan, in the fact that it rewards you for adding money early and by consistently adding funds to the account. A 529 plan is usually used to save up for distance events like your child’s college education.
If you are interested in investing in a 529 plan, you can do so through a state-sponsored plan designed for educational purposes, which is the most common plan used to contribute to a college fund. With a 529 plan, you will not pay taxes on the money that you earn, nor when it comes time for you to withdraw money from the account for educational purchases. When you are ready to invest in a 529 plan, do your homework first to find the best option for your family. You do not have to open a 529 plan in the state in which you live. Though many states offer residents a tax break for using their 529 plan, you can compare the plans between states, which allows you to see which states in the country offer the lowest fees and broader investment options.
Look into Refinancing Your Student Loans
Just as it is critical for parents to invest their money retirement accounts and college savings accounts, it is also crucial that parents address their student loans. If either you or your partner is still paying off student loans, you may be able to get a lower interest rate and a lower monthly bill by refinancing the loan. Once a refinancing lender has assessed your case, and it is determined that you meet all of the requirements, they may offer you a lower interest rate on the current loans. The main types of loans that benefit from refinancing are private loans with high interest rates. But if you want to take advantage of federal forgiveness or repayment programs, you may want to hold on to your federal student loans. If you refinance federal loans, you lose any rights to potential federal repayment options or federal loan forgiveness. If you refinance your loans, you can use those savings on household expenses or you can reinvest the money for your child’s education.
Create a Flexible Spending Account for Your Child Care Needs
Parents will quickly learn that child care is one of the most significant new expenses that will be added to their budget after they have children, especially if both parents plan to go back to work and you have no other option of family child care. Luckily, many employers offer dependent care flexible spending accounts, which parents can opt into if they are interested. You can fund this account pre-taxes from your paycheck, and you have the power to choose the amount that you will contribute to the account annually. In turn, you can use these funds to pay for most childcare options.
Parents that are interested in opening a flexible spending account should research daycares and preschools in their area to estimate how much they will most likely be paying per month for child care. Once you have determined that price, you should try to save that amount each month in the months leading up to you or your partner’s return to work. Doing so will help you prepare to live on a new budget. With such preparation, you can worry less while you enjoy your time with your child.
When buying clothes for your child, try to avoid the full-priced clothes and head to the sales, clearance and off-season sections. You might not see your child’s current clothing size in these sections, but you may see something that they can wear next season at half of the price.
However, if you see an item that you think your child cannot live without, try to practice the 24-hour rule. Allow yourself 24 hours before you add the item to your online shopping cart or purchase the item in-store. By making the 24-hour rule part of your shopping routine, you allow yourself ample time to consider the purchase. Within the 24-hour window, you will have decided if you genuinely need to purchase the item or if you can put it back on the shelf confidently. Children grow quickly and may only get one use of an outfit before they are too big to wear it, so it is best to consider your purchases carefully. If you create a household budget, this will allow you to determine how much you have for different types of expenses, especially child care expenses.
Make the Most out of Free Event
With each passing year, it becomes more appealing to buy your child more items and spend more money on expensive outings. However, free activities in your community, like a trip to your nearby neighborhood park or farmers market, give you and your family opportunities to make friends organically and without spending a surplus of money. If you are interested in finding events in your neighborhood, go to your local neighborhood community center and check the calendar of events or, they can check online. A universal and free event includes library readings, which are often offered to a variety of ages. The sooner you discover what your community offers, the earlier you can make the most of the free events that will save money and help you a simpler life.