Saving tips for first-time parents

Becoming a parent is a life-changing moment. But parenthood often brings financial challenges. From baby supplies to healthcare, the costs of raising a child can quickly add up and drain your bank account.

First-time parents can feel overwhelmed by these expenses, but with careful planning and smart financial strategies, it is possible to minimize the financial burden. Here you will find savings tips to help you prepare.

The cost of raising a child

The cost of raising a child has steadily increased over the years. According to a Bankrate study, the average cost of raising a child from birth to age 17 in the United States is an estimated $313,939, which is about $18,000 per year. This number includes expenses such as housing, food, child care, education and health care.

Understanding these costs will help you budget more effectively and prepare for the future. The key is to create a financial plan that addresses immediate needs while anticipating future expenses.

“It’s important to start preparing early to minimize stress,” says Rachel Caballero, community development and public relations manager at TruWest Credit Union. “Re-evaluating your budget to identify spending gaps such as beauty treatments that can be done at home and unused services or subscriptions can lead to further savings to prepare for your new arrival.”

How to save money on baby basics

The birth of a newborn often comes with a long list of important purchases such as diapers, clothing, and baby equipment. These costs can quickly become overwhelming, but there are ways to save money without sacrificing quality.

Buy used items

Many baby products such as cribs, strollers and high chairs can be used gently at a fraction of the cost. Look for quality secondhand items through online marketplaces, thrift stores, or parent groups.

“Expectant parents spend way too much money on baby clothes,” says Christine Landis, founder of Peacock Parent Inc. “Babies barely wear clothes. They sleep 80 percent of the time, are swaddled and only need simple onesies and socks. Don’t buy shoes for babies. Sure it will look cute for a photo, but I would rather spend that $30 on a newborn care specialist or a sleep coach.”

Borrow from friends and family

If you have friends or family members with young children, ask if they have any baby gear that they no longer need. Many parents like to lend or give away items that their children have outgrown.

Consider generic brands

Diapers, wipes, and baby formula are available as generic or store-brand products, which are often just as good as name brands but cost significantly less.

Create a registry and limit yourself to the essentials

When making a baby list, focus on the items you really need. Avoid unnecessary gadgets and luxuries and prioritize the essentials.

Tips for saving money on childcare

For new parents, childcare is one of the biggest expenses. However, there are strategies that can help you save on child care costs.

Check out a Dependent Care Flexible Spending Account (FSA).

Many employers offer a dependent care FSA, which allows you to set aside pre-tax dollars to cover eligible child care expenses. This can lead to significant tax savings.

Consider a nanny share

With a nanny share, two or more families share the cost of a single nanny. This arrangement can be less expensive than hiring a nanny just for your family and can provide more personalized care than traditional day care.

Take advantage of family support

If you have family nearby, ask if they can help with childcare, even if it’s only part-time. This can significantly reduce the cost of formal childcare.

“If you can’t afford full-time child care, get creative with how you and your family finance child care,” says Annie Cole, money coach and founder of Money Essentials for Women. “For example, family members could commit to certain evenings. Consider joining a parenting group and swapping childcare responsibilities. You and your partner could ask for a flexible schedule at work to free up days or part-days for child care. Also talk to your employer about possible childcare subsidies.”

How to save money on your child’s healthcare

Healthcare costs can add up quickly, especially in the first few years of a child’s life when regular doctor visits, vaccinations and unforeseen illnesses are commonplace. Here’s how you can reduce these expenses.

Choose the right health insurance

Consider your health insurance options carefully before your baby is born. Make sure your plan offers comprehensive coverage for pregnancy, delivery and child care. Compare deductibles, copayments and out-of-pocket maximums to ensure you choose the most cost-effective option.

Explore government food assistance programs

Many states offer programs such as the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which help offset food costs for low- and middle-income families. Research programs in your area to see if you qualify.

Take advantage of free or low-cost healthcare services

Many local health departments and clinics offer free or low-cost services such as vaccinations and health exams for children. Use these services to save on routine care.

Use in-network providers

Choose healthcare providers within your insurance network to minimize out-of-pocket costs. Also consider looking for a pediatrician who offers flexible payment plans or accepts Medicaid if needed.

Create a Health Savings Account (HSA)

If you have high-deductible health insurance, you can open a health savings account. Contributions to an HSA are tax-free and can be used to cover qualified medical expenses for your child.

Tax measures that save new parents a lot of money

When you become a parent, you gain access to several tax breaks that can help you save money. Here are some tax measures you should consider.

Claim the tax credit for children

The child tax credit allows parents to claim up to $2,000 per eligible child on their federal tax return. Make sure you claim this credit to reduce your tax liability.

Take advantage of the earned income tax credit

If you have a lower or moderate income, you may be eligible for the Earned Income Tax Credit, which can provide a significant tax refund.

Use a care loan

In addition to dependent care FSAs, you may also be eligible for a tax credit if you pay for child care benefits while you work. This credit can be up to 35% of your eligible child care costs, depending on your income.

“Your child care costs and possibly other child-related expenses could help you with your taxes,” says Dawn-Marie Joseph, founder of Estate Planning & Preservation. “The IRS website provides a wealth of information and is very user-friendly. Ask your tax advisor what credits you can receive.”

New parents should avoid money mistakes

As a new parent, managing finances can be difficult, and many make common mistakes that can harm their financial future. Here are some pitfalls to avoid:

Budgeting mistakes

Failure to create a budget can lead to overspending and financial stress, especially when you consider all the additional costs associated with having and raising a child. Be sure to keep track of your income and expenses to ensure you are living within your means and saving for future needs.

“You should track your spending in a budgeting application or at least a spreadsheet,” says Doug Carey, CFA, president and owner of WealthTrace. This way you can continue to budget effectively for your new child.”

No prioritization of retirement planning

While it’s natural that you want to focus on your child’s financial needs, it’s important that you don’t neglect your own retirement savings. Make sure you make regular contributions to your 401(k) or IRA account as you save for your child’s future.

“Even though your expenses will increase when you bring home your new baby, that doesn’t mean you should forget about contributing to your retirement and emergency funds,” says Joseph. “If you need to reduce these contributions for a short period of time, then do it, but get back on track as quickly as possible.”

Neglecting emergency savings measures

An emergency savings fund is important, especially if you have a family. Try to save at least three to six months of living expenses in an easily accessible account to cover unexpected costs such as medical emergencies or job loss.

“This is so important before the baby is born,” says parenting expert and child care author Tammy Gold. “Assess all current costs and forecast future expenses so you can see where you need to adjust your budget. Meet with a financial planner or even a bank representative to learn some savings strategies.”

Conclusion

Becoming a parent is a rewarding experience, but it also comes with significant financial obligations. By taking the time to plan ahead and make smart financial decisions, you can manage the costs of raising a child without overstretching your budget. With the right strategies, you can secure your family’s financial future.