My wife and I have recently started a family and are completely thrilled over becoming new parents. After coming home from the hospital, we very quickly realized that there are several new financial responsibilities that come with being a parent. We did our due diligence and felt prepared for most of the big changes, but there were still plenty of things we wish we knew beforehand. Raising a child isn’t easy and there’s no such thing as too much financial advice for new parents. Thankfully, being an accountant and a new parent has given me a lot of perspective and I have plenty of tips to share. Here’s what I learned:
#1- Set up an FSA
During our hospital stay, the nurses were friendly, the doctors were extremely patient and the overall care was impressive, but then the hospital bills came. Setting up a flex spending account is a great way to prepare for it. FSAs can help alleviate the stress of paying overwhelming medical bills that may not be covered by your insurance provider.
The funds that you put into your FSA account are considered pre-tax. These pre-tax dollars can then be used to pay for a variety of medical expenses including medical bills, prescription drugs or even day-care. Although FSA’s can be extremely beneficial, it’s important to understand that there are strict terms and conditions involved with them. For example, any contributions made towards your FSA must be spent in the year that they are contributed. As such, my financial advice for new parents is: use it or lose it! If you’d like to learn more about FSAs, the Aetna Insurance website is a great resource.
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#2- Create a Budget
You’ll come to realize as a new parent that your list of child-care must-haves is never-ending. Kids grow quickly which means you’ll need a way to pay for new clothes, toys, birthday parties, school events, you name it. Rather than making minimum credit card payments to get by, create a realistic and detailed budget. First, identify the difference between luxury and priority expenses. Make a list to rule out unnecessary items so that you have funds readily available for the necessities. The second step is to review your budget from time to time and update it as needed. Lastly, stick to your budget. Taking the time to create a budget will help you make rational and hopefully good financial choices for your family. Pro tip: don’t forget to include a line item for your child’s college savings fund. There are plenty of great resources out there such as mappingyourfuture.org to help you get on the right track.
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#3 Use a Business Adviser for New Business Ventures
Many new parents are at a stressful and overwhelming point in their career. Despite having young children, they’re held up to the same if not greater expectations than before which can feel overwhelming. My biggest piece of financial advice for new parents in this position is to not take on more than you need to. If you’re exploring your career options, use any and all resources available to you. Whether you’re looking to start a new business, hang your shingle or invest in a new project, you should consider the benefits of hiring a business adviser. These type of professionals can help you not only build a business plan, but also act as a mentor or CFO. The best place to start looking for a business adviser is in the financial sector. They understand the importance of keeping a holistic view of your taxes, which is why they offer these type of services.
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In conclusion, raising a child is not only a big time commitment, but a huge financial one as well. The good news is – it’s almost always worth the investment. Feel free to contact me if you have any financial questions regarding the topics we covered. I’m happy to help!
By: Staff Accountant
