The arrival of a new child signals a transformation in all aspects of your life, including your finances. The Department of Agriculture estimates the cost of raising a child to age 17 is $233,6101 – and doesn’t include college. With this sobering statistic in mind, you can plan ahead to make the family journey easier.
Start by updating your budget with additional expenses including diapers, formula, toys, books and daycare if needed. There are many ways to minimize your expenses:
When it comes to employer-sponsored benefits, you may want to think about:
Tip: Welcoming a new child is a qualifying life event, which allows you to make changes to your benefits outside of annual enrollment.
Your tax situation will be affected as well. You may now be eligible for additional tax benefits, including:
Tip: You can’t double-dip with the dependent care FSA and the dependent care credit but, depending on the amount of your childcare expense, you may be able to take advantage of both. Work with a tax preparer to identify the strategy that will be most beneficial for you.
Consider ways to protect your growing family, including:
Tip: You may have access to legal benefit through your employer’s coverage. Consider starting there to find an attorney if you don’t already work with one.
To help pay for your child's education consider starting to save now. There are several accounts that may be used to save for education:
There’s a lot to think about, but with proper planning you can be as prepared as possible before the arrival of your new child.
1The Department of Agriculture, 2015.
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Updated for tax year 2020
Updated for tax year 2019