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10 Ways to Prepare for Your Baby's Financial Future


As a mom, you're well aware of the day-to-day needs of caring for your baby: feeding, napping, diaper-changing, playing, and sleeping. It's also important to consider the financial needs, present and future, of your little one. What can you do to prepare for your baby's financial well-being? Here are 10 ways.

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1. Get into the Habit of Saving

a pink piggy bank

Although we can't predict the future, it's likely that your child will need money down the road for higher education or for a car, wedding or down payment on a home. That’s why it’s important to get into the habit of saving now. 

Farnoosh Torabi, a personal finance expert and financial correspondent at, recommends putting money away for your child on a regular basis. Even $10 a week, automatically transferred from a checking to savings account, is a start! You can always increase or decrease the amount along the way.

2. Save for College Expenses

a glass jar filled with coins

With the cost of college ballooning, it's essential to start saving when your children are young. According to a recent survey by NerdWallet of 1,200 current and expecting moms, nearly 44 percent of moms who now have teenagers wish they had been urged to start saving sooner. Find out your options. Certain kinds of save-for-college accounts can offer tax advantages, investment opportunities, or guaranteed-cost tuition, depending on the kind you choose.

3. Consider Life Insurance for Your Child

a young boy outside blowing bubbles

Life insurance isn't just for adults. Children’s whole life insurance offers, for example, a fixed premium rate throughout your son or daughter’s childhood. At age 18, the coverage amount of the policy may double with no increase in your premium. By buying and maintaining your child in a whole life insurance policy now, you're also assuring that he or she will be able to buy life insurance coverage as an adult, regardless of occupation or health. 

Children’s whole life insurance policies accumulate cash value over time, which can serve as a way to build reserve funds for your child. When your child becomes owner of the policy at age 21, he or she can opt to cash out the policy or keep it, and, if desired, to expand coverage by buying additional insurance.

4. Buy Life Insurance for Yourself

a mom holding her young daughter

Parents should have life insurance when possible. Says Torabi: "You should think, 'To what extent do I want to financially take care of my family in the event that I'm gone?'" If something should happen to you, your life insurance policy would provide financial support toward your family’s needs. Whole life insurance provides coverage for up to the insured’s entire life, and offers a cash-value component that can be borrowed against if needs arise. Term life insurance provides coverage for a fixed length of time, usually 10 or 20 years.

A good guideline is to purchase a policy that provides eight to 10 times the amount of your current salary. If you choose term life insurance, be sure to select a policy that will be in effect until your child is at least 18, and consider taking out a longer-term policy if you would like it to remain in effect throughout your child’s years in college or even graduate school.

5. Create a Written Will

a piece of paper with

With a baby in the house, it's essential to have a will that designates the beneficiaries of your assets should something happen to you. If you don't have a written will and the unspeakable happens, your assets will likely be divided up by the court – or could even go to the state rather than to your loved ones.

Many people think of money when they hear the word “assets,” says Torabi, but even parents who don't have much in the bank should create a will. Everything you own – your house, car, jewelry, home furnishings, and even pets – is an asset. A will gives you control over how your assets are dispersed. To make a will, spend an hour with an estate-planning attorney, says Torabi, or, if your assets are minimal, try accessing some of the necessary forms online.

6. Encourage Your Relatives to Pitch In

a grandad holding up his grandson

Involve your child's extended family in saving for your child's future when they give gifts. For example, encourage grandparents to purchase a savings account or life insurance policy in your child's name. Celebrations that generally include gifts are another time to generate funds for your child, says Torabi, so when planning christenings, birthdays, bar mitzvahs, or quinceañeras, consider asking guests to make a financial contribution to your child's future in lieu of toys and games.

7. Teach Kids About the Value of Money

two kids raking some leaves

Lay the groundwork for a financially successful life for your child by being open and communicative about money. "Teach your child early on that to have money you have to work hard for it," says Torabi.

You could open up the discussion by counting change together or by proposing a weekly base allowance, with a bonus for good grades in school. You could encourage your child to save allowance and gift money to buy a desired item, rather than have you buy it, and to make and sell something that neighbors might enjoy buying. You could spur your child to do more household chores by asking him or her to identify what needs to be done – such as dead leaves that need to be raked and bagged – and to negotiate an amount of money for doing the job. In the process, you’ll be helping your child to develop creative thinking, entrepreneurial skills and negotiating ability, and to understand the importance of knowing how to make money.

8. Get Rid of Debt

the word debt being rubbed out

Parenting is expensive. The cost of raising a child from birth to age 18 is now more than $245,000, according to the United States Department of Agriculture. That's one reason why Torabi urges people to eliminate their debt before having kids. "Try to start parenthood with a clean slate, since you’re likely to incur a heap of additional costs preparing for and raising a child," she told us via email. Kids may bring on the need for a larger house and bigger car, she points out. Since you may need to take out a loan for such major purchases, be aware that lenders give preference and better rates to applicants who have good credit scores and reports.

9. Maintain Your Health Insurance, and Know What It Covers

a young girl being checked by a doctor

The cost of giving birth in a hospital varies wildly based on the hospital where you deliver and any complications you might encounter. It could cost in the thousands of dollars. If the baby will not be your first child, you’ll want to find out how much of the cost your health insurance will cover and what your out-of-pocket costs will be, says Torabi. Also consider your plans for after the birth. If you’re not going to be returning to work, make sure that you and the baby can be insured under your partner’s health insurance plan, or explore your options and costs of signing up for Affordable Care insurance (“Obamacare”).

10. Pay Yourself First

a birds nest with golden eggs sitting in it

Be sure you have an emergency fund and are saving for retirement before funding your child's college or savings account. As a parent, says Torabi, it's important to "prioritize your needs first. The reality is that someday you're going to need money, and at that point you don't want to become a financial burden." Scholarships, grants, financial aid and student loans provide ways to make college affordable, she points out.

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