Content Courtesy of USAA

Raising a child from birth through age 17 will cost a typical middle-income family approximately $241,080, according to a 2013 report from the U.S. Department of Agriculture.


Consider the following guidance to help plan for your financial future, prepare for your new baby and protect your growing family.



  • Prepare your baby budget now. Long before the due date, examine how your baby will affect everyday expenses. Stroll through baby aisles, take notes, then redo your annual budget to include new line-item expenses and any changes to your income. This exercise can help you figure out if you need to cut spending in other areas.
  • Experiment with living on one income. If one parent is thinking of leaving the workplace to care for the baby at home, try living on one income, well before the baby arrives, to see how feasible it is. But don’t quit your job just yet. Direct the second income into savings while you’re experimenting.
  • Think twice before buying a new home. A new home for your growing family sounds tempting, but you could find yourself baby rich and house poor. Not moving at all might be better, at least for a while.
  • Update your will and appoint a guardian. Estate planning is always important, but its significance increases once you have children. Be sure to update your will so you, and not the court, can name a guardian for your children in case something happens to you.
  • Purchase life insurance. The importance of life insurance increases when a new child is depending on you for physical and financial well-being. Talk to your life insurance company about how to protect your family, and don’t limit the coverage to just the primary breadwinner. Replacing the contributions of a stay-at-home spouse is expensive. So if one of you plans to stay home with the baby, make sure you’re covered as well.
  • Start planning for college early. The average cost of tuition and fees for the 2013-14 school year added up to $8,893 for a public college and $30,094 for a private one, according to the College Board. Add in room and board and the costs increase to $18,391 and $40,917 respectively. Parents who want to chip in may consider setting aside some money today in a 529 college savings plan.
  • Build your emergency fund. A new baby will increase the likelihood that you’ll have some unplanned expenses. Make sure your emergency fund is up to the task by accumulating the equivalent of three to six months of expenses.
  • Take advantage of tax savings. The IRS generally allows you to take an exemption for dependent children, including those born or adopted anytime during the year. Depending on your income, you also may be entitled to a child tax credit for each qualifying child younger than 17. Parents who work and pay for day care for their dependent children also may be able to take advantage of a child care credit. If you work, visit the IRS withholding calculator to see if you should adjust the income tax withheld from your paycheck.
  • Use a flexible spending account for day care. If your employer offers a flexible spending account, you may be able to use it to pay up to $5,000 in child care expenses a year. That money will be exempt from income taxes.
  • Say bye-bye to brand names. Your baby won’t know the difference between top-of-the-line baby blankets and less expensive, quality ones that feel just as snuggly. Hand-me-downs, consignment shops, garage sales and even popular online auction sites are great sources for gently used, quality children’s clothes at bargain prices.
  • Saving for retirement comes first. Saving for retirement should take priority over saving for your child’s college education. Student loans and part-time jobs are available for the college crowd, but loans generally cannot be found for retirement.