[Read: [Read: How to Stunt a Child’s Financial Growth]]
First-time parents face a plethora of unknowns when their little one is first born. However, on top of all the worrying, nervousness and lack of sleep is a burst of excitement and the unconditional desire to do the best for our new born child. Not only does this mean that we want to keep them healthy and happy; we also want to avoid the financial mistakes made by new parents.
[Read: [Read: How to Stunt a Child’s Financial Growth]]
A concerning statistic, echoed by departments such as the USDA, states that it costs about $250,000 to raise a child! This is enough to send any new parent’s blood pressure through the roof! However, there are many ways to reduce your spending way below this estimate. Just try to avoid some of the financial mistakes that new parents make.
You may think, for example, that the perfect setting to raise a child is in an idyllic suburban house. But jumping into the housing market is not always a good fiscal idea, especially if you don’t have enough money for a good down payment. This will impact the amount you have to pay back in total for your house, meaning higher monthly payments and less money to spend on the things you need (mainly diapers to begin with!) Large financial commitments are a financial mistake for new parents.
Buying a house also means that you lose the flexibility you have with rented accommodation. New parents are often young couples still looking to further their career, which isn’t always easy if you’re tied down to one location. Plus, you’ve got an increased amount of responsibility with a house that you own yourself. This is sometimes a great challenge to take on, but maybe not while you’re getting to grips with looking after a newborn baby!
Savings
You’ll be surprised how quickly time flies when you have a little one in the house. One moment they’re barely able to crawl around on the floor, the next they’re heading out the door on their way to college. So don’t let the time run away from you. A lot of new parents make the financial mistake of not saving early enough, therefore putting added pressure on themselves when the deadline looms. So many of us hope that our children will do well at college, but with the average student debt rising to over $35,000 recently, it’s important that we start saving as soon as we can. Ways to save money include:
- Opening a savings account in the child’s name
- 529 college savings plan or Qualified Tuition Program (similar to the 401(k) plan, these allow the parents to save for their child’s education, tax free)
- UGMA and UTMA (although these allow the child to spend the money on things other than their education)
- Prepaid College Tuition Plans (allowing you to pay for part of a college course now, at today’s prices)
- Coverdell Educational Savings Account
Spending Equals Love?
As we all want the best for our children it’s easy to fall into the trap of believing that buying them the best things will prove that we love them. This is probably the most common financial mistake made by new parents. Although it is important to spend money on the essentials, such as a car seat and a stroller (which, by the way, costs an average of $400), other items are often more likely to impress other parents more than your own children. Plus, if you choose to have more than one child, you’ll feel even more pressured to repeat the spending for them! Don’t be afraid to be resourceful in accepting second-hand gifts such and clothes from other family members. Prioritise. Ask yourself, what does my baby need to be healthy and happy? As long as your baby is comfortable they won’t mind if she hasn’t got a designer name on her romper suit! Also remember that in the early years a child doesn’t understand the reason for gifts at Christmas and birthdays, so a massive pile of presents means nothing to them. Try to avoid these financial mistakes made by new parents and instead try to focus on showing your love in other ways, by building happy memories of fun family times together.
[Read: How to Stunt a Child’s Financial Growth]
If there’s one lesson we can learn from this, it’s that the financial mistakes we make as new parents are bound to affect our children. On a more positive note, as parents we can help to show our love by guiding our children on the right financial path, showing them what mistakes we’ve made in the past and what we’ve learnt from them. Setting a good financial example is just one of the ways we can show our love for our children, by showing that we want to nurture and educate them so that they’re ready for when they have to make their own financial decisions in life.