Credit Counseling Blog

You’re excited about having a baby. But you may not realize that your little bundle of joy can cost a bundle.
According to the U.S. Department of Agriculture, the typical middle-income family will lay out $190,980 in today’s dollars to raise a child through age 17.

Start Budgeting Now

Financial planning experts suggest these basic moves:

Cut back on entertainment and other luxuries.

If you’re a two-income family, try living on one. Then you’ll know whether one of you can stay home with baby.

Sock savings into an emergency fund for unexpected post-baby expenses.

Feathering the Nest

Start envisioning your perfect nursery and economize where it’s practical. You can:

Decide what nursery gear is really essential.

Ask gift-givers for nursery items rather than toys and newborn outfits.

Shop for baby furniture at garage sales or consignment stores.

Buy value, not image. For example, store-brand formula is comparable to a name brand, but is half the price.

Daycare Dollars

Most parents get sticker shock when pricing childcare. According to The National Child Care Information Center, the average childcare fees for just one infant range from $3,803 to $13,480 annually. To cushion the blow:

Use a flexible spending account and pay up to $5,000 of childcare expenses with pretax dollars.

Consider family daycare services - they are more affordable than privately-run childcare centers.

Try sharing in-home childcare with another family

Enlist family and friends for low-cost babysitting.

Long-term Financial Planning

As new parents, there are other financial needs to consider.

Make sure you have adequate life insurance.

Get a will, and be sure to appoint a guardian to raise the children should something happen to you and your spouse.

Start a college savings plan such as a 529, which allows you to put pre-tax dollars away now to pay for education later.

Instead of toys and clothes, ask grandparents and friends to contribute to a college savings plan.

Childcare Deductions

The IRS is good to new parents at tax time. It allows an exemption for every new dependent, grants credits of $1,000 per child under age 17, and offers childcare credits to parents who need daycare to work.

Here are some tips for teaching kids about the importance of saving:

1. Make sure they have a piggy bank or some place to store loose change and other savings. It all adds up.

2. Give them a bonus amount with their allowance, but only if they agree to put it in savings.

3. Put extra money in their savings for every “A” on a report card.

4. Have them cut out a picture of something they want to buy. Then cut it into smaller pieces. Divide the cost of the item by the number of pieces. You can turn it into a puzzle or simply a reminder.

Every time they save a “puzzle piece amount,” they can add another piece until they’ve saved enough. This will teach them to save for a goal.

5. Mark a calendar as a special “Savings Day.” Create chores or simple tasks they can do to earn special savings amounts.

6. Set up a direct deposit into their savings account. Encourage them to make recurring deposits as well. Use your deposits as a way to match what they put in.

7. Hide a few dollars around the house in places no one ever looks, like the bottom of a sock drawer or in jacket pockets. When the kids find it, encourage them to save the “found” money.

8. Challenge siblings or even a group of friends with a savings contest. See who can save the most, and hand out rewards at the end. Reward everyone, and give the winner a little extra.

9. When you buy them little things, have them put the equivalent cost in their piggy bank

1. Piling Up Debt
Using credit cards  responsibly can help you build good credit so you qualify for lower interest rates on loans. But charging your cards to the max and not paying them off is a sure ticket to trouble. Pay in cash instead to keep spending within your means.

2. Ignoring Murphy’s Law
Bad luck would have it that you’re involved in an accident the day after your auto insurance policy expires. If that happens to you, the financial fallout can be devastating. Be sure you stay fully covered with auto, homeowners (or renters), health care and disability insurance at all times. And if someone else depends on your income, include life insurance.

3. Procrastinating on Saving
In the world of investing, time can be your best friend. Thanks to the power of compound earnings, your chances of achieving financial independence shoot up dramatically when you start at a young age. By waiting even just a few years, you make it much harder to meet the same goal. So find a way to start today.

4. Missing the Match
If your employer offers a 401(k) plan with a company match, make sure you take full advantage of it. Simply put, a company match pays you. If you’re not contributing enough on your own to get the full match, you’re giving away free money.

5. Not Using Cruise Control
Basing your investments on what you have left over at the end of the month will get you nowhere fast. Instead, set up an automatic plan that takes money out of every paycheck. You’ll probably never miss the dollars you don’t see.

6. Co-Signing for Loans
Next time a friend or family member asks you to vouch for them on a loan, politely run the other way. When a bank requires a co-signer, it’s because the person applying has no credible history of paying debts on time. If the person who received the loan is late on payments or simply doesn’t pay up, you’ll be responsible. And it could damage your credit.

7. Driving Upside Down
Let’s say you buy an expensive new car and finance it for five years. Since new cars depreciate quickly, after a short time you may owe more on the loan than the car is worth — being “upside-down” on the loan. To get the most for your money, put at least 20 percent down or, better yet, buy used and drive it ’til it dies.