When you become a parent for the first time, you will experience the joy of raising a tiny human that changes your life forever. Raising a child is highly rewarding but can also affect your financial health. According to a 2020 U.S. Department of Agriculture report, the average cost of raising a child from birth to age 18 was $233,610, excluding college expenses.
Many first-time parents make financial mistakes that may further add to the list of expenses and disrupt their financial health. Creating a sound financial plan can help first-time parents juggle multiple responsibilities and avoid potentially costly mistakes. Here are some of the most common financial mistakes new parents make and tips on avoiding them for better financial health.
Not Updating Their Budget
Underestimating the costs of having a baby is one of the most expensive mistakes first-time parents can make. Some of the costs of raising a baby involve medical expenses incurred before and after birth and expenses that come after birth, such as diapers and baby essentials.
Since you will be dealing with many new expenses after becoming a parent, it can be helpful to cut down your spending and create a new budget with the updated expenses. Updating your budget can help you create a realistic picture of the costs of raising a child. Your budget should include all important expenses, such as medical expenses, clothing, baby gear, childcare, feeding supplies, diapers, and wipes.
Overspending on Baby Gear
As a new parent, you might be unaware of what items you need most before and after your baby arrives. You will need to stock up on essentials, such as bottles, toys, clothes, and diapers. However, this can also lead to overspending on baby gear and unnecessary expenses and credit card bills.
Do some research or speak with experienced friends or family members to determine what your child will need after birth. Create a newborn checklist and purchase necessary items without buying too many of the same things. Babies can grow fast, and overspending on clothes, shoes, or toys will lead to unnecessary expenses as you have to purchase new items as they age. You can also reduce spending by adding important items to a gift registry when you host a baby shower and let your family and friends help.
Living Without a Safety Net
You may have to deal with numerous unexpected expenses as a first-time parent, and living without a safety net can be costly. It’s important to have an emergency fund or financial health that helps you deal with unexpected expenses. Saving up for emergencies is a lengthy process, so starting early is essential. It’s okay to start small and work your way up when creating an emergency fund.
If you didn’t have sufficient resources to build an emergency fund before your child arrived or don’t have a fund big enough to manage a large unforeseen bill, consider taking a short-term online loan. You can get quick online loans from GoDay when you need access to cash after filling out a simple online application. This can help you manage unforeseen expenses, such as medical bills and childcare. One of the many benefits of an online loan is that you can receive an instant decision for your application and fast access to cash.
Becoming a parent for the first time is a rewarding yet challenging experience. The last thing you want is to add a financial burden to the mix. Get familiar with the top financial mistakes mentioned in this article and learn how to avoid them!
