It’s estimated that the total child-rearing expenses from birth to age 17 for a middle-income family is $233,610. Although the range of expenses across families is wide, adding a little one to the family is expensive. Whether you’re expecting a baby or adjusting to life as a parent, consider this checklist your starting point for adapting to your new financial reality.
1. Create a household budget.
With a new child comes new expenses. Baby clothes, diapers, food and childcare expenses add up quickly, in addition to the prenatal and postnatal medical expenses. Some expenses, like diapers and new toys, are recurring, while others such as a stroller or car seat might be a one-time investment. It’s helpful to understand what upfront costs may be a temporary hit to your wallet and what recurring costs will influence your budget over the long haul. Online budgeting apps help.
2. Build an emergency fund.
Unemployment is stressful. That’s why it’s smart to have an emergency fund to cover six to 12 months of living expenses in the event of a layoff or unexpected change in employment. An emergency fund provides a cushion for a new parent while searching for a job and should be calculated based on the new family budget.
3. Add your child to your health insurance plan.
It’s not unreasonable to think your health insurance provider might contact you or automatically add your newborn to your health plan. But it doesn’t always work that way. Fortunately, having a baby is a “qualifying life event,” which allows for an enrollment period during which you can make changes to your health policy. Most plans require that your child be added within 30 or 60 days post-delivery. If done in that time frame, your child should be covered retroactively.
4. Adjust health savings account (HSA) contributions.
HSAs are a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in an HSA to pay for deductibles, copayments, coinsurance, and other expenses, you may be able to lower your overall health care costs. The annual limit on HSA contributions for 2021 is $3,650 for self-only and $7,300 for family coverage. If you’re a member of a qualifying employer-sponsored health plan, HSAs can be taken out of each paycheck and used for qualified health-related products and treatments, including doctor’s fees, infant formula and even breast pumps.
5. Participate in a dependent care flexible spending account.
A dependent care flexible spending account (FSA) is a pre-tax account used to pay for eligible dependent care services such as preschool, summer day camp, before- or after-school programs, and child daycare. It's a smart, simple way to save money while taking care of your loved ones so you can continue to work. Contributions are automatically deducted from your paycheck, and the funds can be used for qualifying childcare expenses. The maximum contribution in 2022 is $5,000 for families.
6. Save for your child’s college education.
The average tuition and fees for private four-year institutions were $36,880 for the 2019–20 academic year, according to The College Board. Even when adjusting for inflation, that’s more than double what it was 30 years ago. Even so, most parents do not view college savings as one of their top financial priorities - perhaps because the expense seems so far off. While it might not be an immediate priority, the sooner you start saving, the more options your child will have.
Oklahoma 529 is a state-sponsored, tax-advantaged 529 college savings plan that’s helping families like yours plan for the cost of higher education. It’s available to any citizen or taxpayer, and just about anyone can contribute, including grandparents, family members and friends.
Oklahoma 529 helps you save more over time. Any Oklahoma 529 earnings grow tax deferred from federal and state tax. Withdrawals for qualified higher education expenses at eligible institutions are tax-free at both the federal and state level.1 Your contributions to Oklahoma 529 may qualify for a state tax deduction. Learn more about the tax advantages.