Five financial tips for new parents

Having children can be a wonderful joy, but it’s also a huge responsibility. Paying for everything from diapers to a college education can be especially challenging for parents. Fortunately, there are financial strategies to help you manage it. Here are five tips for handling money wisely while raising children.

Reevaluate your budget

Budgeting means keeping track of the money coming in and going out, and applying as much control over it as possible. When starting a family, you’ll want to look closely at your budget to make sure you can cover the many expenses involved in raising children. Here’s a short list.

• Child care, such as day care, nanny services, and babysitting
• Daily needs like food, diapers, baby wipes, and clothing
• Healthcare, including medical and dental checkups, insurance, medications, immunizations, and treatment for childhood illnesses and injuries
• Equipment like car seats, cribs, toys, and strollers

At the same time, you may find some items in your budget are no longer necessary. For example, many new parents have less time to watch television and could cancel streaming services. This can free up more money for essentials.

Grow your emergency fund

Having an emergency fund can help with expenses in case of car accidents, medical bills, job loss, and other unexpected events. When you have a child’s welfare to consider, being prepared for emergencies becomes even more important.

A good rule of thumb is to have three to six months of living expenses saved in your emergency fund. Because your expenses go up when a child is born, your savings should increase too. There are many apps and tools designed to help you build savings. Oportun’s Set & Save, for example, automates your savings based on your income and expenses, and within the rules you set.

Refinance or consolidate debt

Refinancing debt means paying off a loan or credit card with a new, lower-interest loan to save money. Consolidating debt means paying off several debts all at once using the funds from a new loan. This can simplify repayment and reduce the risk of late fees. If you have a lot of debt, refinancing or consolidating could save you time and lower your payments.

Personal loans are a common way to consolidate and refinance. Look for a loan with affordable interest rates and fixed payments, like the small personal loans offered through Oportun.

Consider life insurance

Life insurance is especially important once you have children. If one parent passes away, the surviving partner must handle all the expense and responsibility of raising a child. It’s a lot to manage alone.

Life insurance is a way of cushioning the financial impact of death. You pay monthly for a premium so that if you pass away, your partner or children would receive a fixed amount of money. Whether you’re a single parent, the primary wage earner, or a stay-at-home partner, life insurance can go a long way toward replacing lost income and providing for your children.

Create or update important papers

Following the birth of a baby, you generally have 30 days to add him or her to your health insurance policy. The federal government provides low-cost medical coverage for children whose families qualify through the Children’s Health Insurance Program.

Once you have children, there is even more benefit to having a last will and testament. This document states how your assets will be distributed after your death. In it, you can name a guardian for your children in case both parents pass away. An estate planning attorney can help with creating or updating your will, or if it’s important to minimize expense, you can do it without a lawyer—just check your state’s requirements and make sure that whoever administers it after your death knows where to find it.

Review your powers of attorney for finances and health care, if you’ve ever set them. Make any changes necessary. And also be aware of tax credits available for parents. The IRS provides information on its website and answers questions by phone (800-829-1040).

Oportun: Plan for the future while enjoying the present

You can’t protect your child from every skinned knee or disappointment, but you can take steps to create a stable financial situation for your family. Knowing your kids are provided for leaves you free to appreciate their childhood years and the many joys of being a parent.

If you’re ready to try a savings app or take out a personal loan, Oportun is here to help. Visit our homepage to learn about:

• Personal loans
• Credit cards
• Secured personal loans
• And more!

Sources:

Charles Schwab. 6 financial planning tips for new parents
Chase. Planning for a baby financially
CNBC. Budgeting for a baby: Here’s what financial advisors recommend for new parents
Experian. What is life insurance?
HealthCare.gov. The Children’s Health Insurance Program
Experian. What is a last will and testament? IRS. Family, dependents and students credits