Starting a family of your own often comes with many new daily challenges. Sometimes you have little free time to think about the financial future of your family too. However, not spending on anytime on your family’s financial matters can cost your family a lot.
Bringing a baby into the world sometimes can create baby money habits or financial decisions that should have been made before your new family started. Not being able to control your family’s spending or having a budget can overwhelm your family.
As a new parent, I remember wanting the best for my little one, but that didn’t mean my family had to go broke. There are some easy money mistakes you can avoid when becoming a new parent. Check out these 5 Money Mistakes to Avoid for New Parents!
1. Don’t Ignore Your Retirement Savings
The first money mistake to avoid for new parents is saving for retirement. Start with putting a portion of each paycheck towards your retirement fund. If you can, choose a 401(k) since most employers will match the contribution you make. Other options you might want to consider if you don’t have a 401(k) option is a traditional IRA, some contributions can be deductible and the money isn’t taxed until you withdraw it, or a Roth IRA that offers a tax-free growth and tax-free withdrawal in retirement as long as you have owned the account for 5 years and 59 ½ or older.
2. Create a Safety Net
Living without safety net can really hurt your family financially if you need money for a rainy day. You need to make it your top financial goal to open a savings account and start saving right away. You can easily put $20 or more into your savings account with every paycheck. It’s always good to build a safety net that will keep you afloat for 6 months or more.
3. Don’t Ignore Tax Savings
Your family can be eligible for more tax savings than the personal exemption you receive per child. Some child tax credits you can save on are child and dependent care credit and adoption tax credit. You can also get tuition for special-needs students.
4. New is Not Always Best
Overspending is a very common problem for new parents. Sometimes you want to buy the newest thing for your baby. However, all those new baby items you might buy don’t have to be brand new. Your new baby won’t remember them and often the items won’t be used for a long time.
5. Purchasing a Home
When starting a new family of your own, the idea of purchasing a home is followed starting after. However, there are many things new homeowners forget to consider. There are future expenses that occur after having a child. Some new parents don’t plan for the increased childcare expenses or the monthly mortgage payments they will have to make along that too. Before purchasing a home consider if you can afford to cover the expenses along with the ones the come with caring for a new child.