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Home › Articles › Saving Money › For a Rainy Day and Beyond

For a Rainy Day and Beyond

Start Saving Before Baby Arrives

By Gina Roberts-Grey

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The skyrocketing costs associated with raising a child are both intimidating and frightening. Worrying about how to afford diapers and daycare for a new baby is stressful enough for new parents without adding the pressure of extracurricular activities and tuition as your child grows.

CDs, IRAs, 401(k) and flexible spending accounts are just a few of the financial methods used by many to save money or build their financial portfolio. Although you may be familiar with many of these terms, you might not realize how these accounts, and other financial considerations, can affect the baby you're going to have.

While many begin saving for college when their child is young, taking the time to revise the traditional plan of starting to save after a baby is born offers parents flexibility and a variety of options.

Parents like Beth and Bill Ryan of Lake in the Hills, Ill., found dedicating time to their financial portfolio prior to having a baby to be beneficial. "Between the extra and unexpected costs of having a child, and the amount of time it took to adjust to being parents, we wouldn't have been able to investigate all of our options as thoroughly as we did until our daughter was older," says Beth Ryan.

Saving before your baby arrives offers the chance to save based on both long-term and short-term goals. Registered Financial Planner and Certified Financial Specialist Rick Sabo of Gibsonia, Pa., stresses the importance of knowing some savings plan options before a baby is born. "This can offer financial assistance in the first months of having a baby as well as create the flexibility to adjust your savings plan as your child grows and your family's needs change," he says.

Sabo explains that considering a few significant savings and financial alternatives before your baby is born can punctuate the excitement of having a new baby and set your family on the path to financial security. "You'll bring your child into a home with excellent and responsible financial examples for him to emulate," he says.

Review Your Monthly Bills
Barbara Muehlfelder, a personal banker and professional home organization consultant in Genoa, Wis., encourages parents to begin taking stock in their financial life sooner rather than later. "The first place to begin saving for a baby is closely reviewing your monthly expenses and income," Muehlfelder says. Knowing exactly how much you take home and precisely what you spend will help you identify how much disposable income you can shift to preparing for and spending on a new baby. "Creating a log of expenses that includes inconspicuous items such as movie rentals and postage stamps is an enlightening way to understand how much money you can allocate to savings or your new baby," she says.

If you're hoping to take an extended leave, reduce your hours or even quit your job, lowering your monthly bills or the amount owed on your home can make the transition easier. Paying an extra mortgage payment or additional principal on your home loan can lead to paying down your loan sooner, paying less interest or having more equity in your home. Paying off high-interest credit cards before your baby is born can lead to additional disposable income to spend on your new child or to channel into a new savings plan for your growing family.

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