People love sharing their secrets about having kids: The importance of having a routine, how to deal with the terrible twos, and where to get the best deal on baby clothes. What they forget to tell you is just how expensive it can be to have them. According to the U.S. Department of Agriculture1 (USDA), it can actually cost a staggering $245,340 from birth to age 17. And that doesn’t even include the cost of college. The Fidelity Viewpoints® article, "Got young kids? Five ways to manage costs," offers a helpful five-step plan for having kids without breaking the bank.
Knowing where your money is going each month is critical to helping make sure you can cover the cost of having kids and still have something left over to save. Here’s a five-step plan to help you stay on track.
- Plan for new expenses.
A new baby comes with more than just a new sleep schedule. More toys, furniture, and diapers may mean a bigger house, which in turn comes with a bigger mortgage. Anticipating these changes can help you make room in your budget and cut out other unnecessary expenses.
- Protect your family.
You've heard it before. Having an emergency fund is a smart way to protect yourself in case something unexpected happens. Fidelity suggests putting aside three to six months' worth of living expenses, just in case your car breaks down or you lose your job. You can have the money deducted from your paycheck automatically to make it easier, or put it into a separate account just for emergencies.
- Consider housing expenses.
According to the USDA, housing can be the biggest expense for the typical family. While you may need more space once you have kids, don’t buy more than you can afford. Consider other costs like real estate taxes, utilities, and home repairs—they all add up.
- Look into life insurance.
It may not have been so important when it was just you, but now that you have others depending on your income, you may want to consider term life insurance. Typically, the younger and healthier you are, the less expensive it will be. Additionally, you may want to look into disability insurance, which protects you in the event an illness or injury prevents you from working.
- Start saving for college now.
It may seem too early. But trust us, if you start saving now, that tuition bill will feel far less intimidating by the time college comes. Consider a 529 college savings plan, which helps you save for higher education expenses like tuition, books, and room and board with potential tax advantages. More details on 529 accounts, right here.
THE BOTTOM LINE
Those little bundles of joy can cost you big bundles of cash. But these five tips can help your family get financially ready in no time.
Take the next step
Use our Having a Child Checklist to start putting a plan in place for your family.