Expecting? Here’s 15 Commons Money Mistakes New Parents Make

First and foremost, congratulations on your child! Being a new parent is such an honor!

Now, as a new parent, you’ll now have the important responsibility of caring for another human being. Like any gift you receive, a child is something to not only care for but also cherish forever.

Though, you might have questions or concerns on how to be financially stable when raising a child. You’re not alone. Many new parents have this same concern as you do. According to PR Newswire, the average cost of raising one child until the age of 17 is $233,000, nearly $14,000 per year. More concerning, The Bump suggests that the 3 financial concerns that new parents have are the following:

  • How will they afford their child?
  • How will they be able to pay for their child’s college? AND,
  • What if something happens to the parents themselves?

To make matters worse, finances might or might not get a time of day, since most new parents will focus more on functioning on little sleep and tending to their child’s never-ending needs. While that’s all understandable, it’s still important to have a plan for your finances, even if you’re a new parent.

The good news is, we’re here to help you with your finances, as you continue to tackle being a new parent! In this essential guide, we’ll show you 15 of the most common mistakes that many new parents make when it comes to their finances, and how you can avoid them.

Let’s dive right in!

1. Not Having A Budget

First, having a budget is a must. Even if you’re well off financially, you should still think about finances.

Now, keep in mind that having children isn’t the same as living on your own. “That means that whatever activities, for example, that you’d use to do pre-baby would no longer be available to you after you have your baby. Suppose you would go to the bar and spend money on drinks. Or, you might have had the habit of saving money pre-baby. Now, with a new addition to the family, you find yourself spending money on your bundle of joy. That’s totally normal.

No matter the case, you’ll need to have a plan, when it comes to budgeting. Budgeting helps you see what you need, and what you don’t need. Rather than spending blindly, budgeting helps you be smarter with your money. Think about the types of groceries that you’ll need for both you and baby, along with the bills, doctor visits, transportation needs, and so on, that you and your baby will need. In this way, you and baby can be ready for any other expenses that might spring up on you.

Speaking of any other expenses that might spring up out of nowhere, this leads to the second point …

2. Not Having A Safety Net

Yes, having a safety net is essential. Sometimes, life might throw some curveballs at you without warning. This is especially common for new parents since they’re still new to the game.

Here’s one example: Suppose that you have a car to run errands with your child in tow. What would happen if your car broke down, or you get a flat tire? Would you have the money to fix your car? Would you have a spare tire on standby?

Here’s another example: No new parent wants to see their child get sick or hurt. But what if your child gets sick or injured? Would you be able to afford their medical bills? Their doctor visits? Their prescribed medications?

That’s why it’s important to set up an emergency fund. Essentially, you set aside money every time you get paid (if you have a job); or, if you receive money as gifts, you can set that aside for emergencies. In this way, you’ll create a safety net for whenever things like medical or repair crises arise.

3. Spending Too Much On Baby Things

Who wouldn’t want to spoil their first child? In fact, as a first-time parent, you would want to treat your child to many things like toys, clothes, and other nice things. After all, you only want the best for your bundle of joy.

However, while it’s great to treat your child with toys and goodies, it’s still important to be wise about your spending habits. Essentially, you have to think about the things that your baby will need, including:

  • Food
  • Clothes, shoes, and diapers
  • Toys that are effective in entertaining your child
  • Doctor visits and medicine, etc.

Plus, you can have hand-me-downs for things like clothes, toys, etc. (If you have a big family, this can be a definitely great thing for you!) You can also look to yard sales and thrift stores to save money on things like baby clothes.

4. Spending Too Little On Baby Things

Now, just because you’d want to save money, doesn’t that you should deprive your child from having things like toys, food, and other necessities. It’s important to make sure that your child is well-fed, well-entertain, and well-off. That’s why you should set a good budget for how much to spend on your child, and how much to save. Just as long as you’re not cheating your child out of certain things, you should be okay on the financial part of things.

Remember the essentials (as mentioned in the previous point):

  • Food
  • Clothes, shoes, and diapers
  • Toys that are effective in entertaining your child
  • Doctor visits and medicine

… and so on.

Needless to say, don’t deprive your child, but still be wise about your money.

5. Not Saving For Retirement

One of these days, you’ll find yourself needing to retire from your job. While retirement can be a new phase in your life, you’ll need to be ready before that day comes. That means, now is the time to start saving for retirement, if you haven’t done so already. (Yes, right now!)

But how can you save for retirement? Well, there are a few options:

While saving for your child’s college fund is just as important (which we will cover later on in this guide), you would still need to think about squirreling away money for retirement. If you need to borrow money from your child’s tuition, you can. Plus, if your place of employment offers 401(k), then don’t hesitate to sign up for it. Whatever you can do now to save for retirement, do it now! Otherwise, you won’t have a nest egg to be cushioned with in your golden years.

6. Not Looking At Eligible Tax Savings

Believe it or not, there should be tax breaks and savings, if you’re a parent. In fact, there are tax breaks for almost any situation, if you do your homework really well.

With that said, consider the following tax exemptions:

  • The popular personal exemption of $3,950 per child
  • The child tax credit of up to $3,000 for each child, depending on how much you make
  • The child and dependent-care credit, which covers up to 35% of the cost of things daycare, pre-K, day camp, etc.
  • The adoption tax credit (up to $14,300 to cover things like fees, court costs, and travel expenses, etc.), AND
  • Tuition for special-needs students (provided that the tuition and other unreimbursed medical expenses exceeds 10% of your adjusted gross income)

So, you see, it pays to do your homework and find tax breaks that you’re eligible for. The Internal Revenue Service (IRS) has a page where you can check out your family’s eligibility for any tax breaks, credits, or deductions.

7. Not Looking Into Life Insurance

Life insurance, whether you have children or not, is important for anyone and everyone. Having life insurance is essential, because if you, your spouse, or both you die for some reason or another, then it’s important for your dependents – your beneficiaries – to be provided for when you’re gone.

One option is to get some life insurance coverage through your employer. However, you can never rely too heavily on it, because that’s not enough to cover everything if something were to happen to you. Plus, if you get laid off, or you get fired, you’ll lose your employer-provided insurance.

So, what’s the recommended amount that you need as part of your life insurance plan?

It’s important to have at least a $500,000 policy – and that’s bare-bones minimum. In addition, you’ll need to invest in a group policy rather than an individual one, because the former option is much cheaper than the latter.

As for when your children grow up, you’ll need to think about keeping them insured until they are through their schooling and no longer need your financial support. Once your children grow up, have paying jobs, and are living independently, then you’ll no longer need them to have them insured on your plan. You can always recommend to them your insurance company, if you’ve had good experiences with said company.

Plus, consider the idea that when your dependents are through college and don’t need financial support, you can opt to convert the insurance policy to a permanent whole life or variable life one. By doing so, you can decide later if whether or not you want lifelong coverage.

8. Not Looking At Disability Insurance

It can be devastating for your child to either grow up to have a disability or be born with one. However, that doesn’t mean that you can’t find disability insurance for them. Even if you’re financially well off, you should still think about getting disability insurance. Like anything else in life, debilitating injuries can lead to disability, which can cost you thousands of dollars if not covered by insurance.

There are a few ways to get disability insurance:

a. If your place of employment offers insurance, then sign up for it. Once you satisfy the conditions for it, you’ll be covered by their insurance.

b. Look at different insurances and plans and see which one is the right for you and your child, along with how much it will cost.

Now, if you’ve been out of work for a while, be sure to research policies that can help you while you look for another job.

9. Signing Your Child Up For A Savings Account

Like anyone else, your child will eventually learn to save money. However, when opening a savings account for your child, don’t do it prematurely. While it might be tempting to open a custodial savings account after a relative sends your child a check or money, it’s a big no-no. Why? Because if you need money right away, you can’t access it. Plus, having a savings account for your child can make you ineligible for financial aid.

So, how can you ensure that your child has a good nest egg?

Opt for a 529 plan instead. By putting your child’s money in a 529 college-savings plan, the money grows tax-free as long as you use it toward college expenses eligible under that plan. Be sure to read up on your bank/institution’s rules and policies as you set up a 529 plan for your child.

10. Ignoring A Healthcare FSA

According to Healthcare.gov, a flexible spending account (FSA) is where you put money into it, and then use it to pay for certain out-of-pocket healthcare costs, while not having to pay taxes on it.

Ignoring this beneficial account can cost you in the long-run. Without an FSA, you’ll risk paying for doctor visits, bills, etc. out of pocket, which can take a toll on your wallet. So, why not save big by signing up for it?

All you have to do is take into account the following:

  • Your doctor expenses
  • Dental costs
  • Your prescription costs
  • Vision, etc.

Next, allocate that amount (which is usually up to the annual FSA maximum of $2,750 per year) at open enrollment, when applying for an FSA. By allocating said amount, that can save you between 20 and 50% on eligible health and medical services.

However, if you’re in a high-deductible medical plan, then go for a Health Savings Account (HSA). An HAS lets you contribute up to $7,200 (family) or $3,600 (individual) tax-free. Afterwards, you can invest in the surplus funds, if you don’t need them immediately.

11. Not Having The “Money Talk” With Your Child

One of these days, you’ll need to talk to your child about money. Otherwise, how else would your child:

  • Learn to save money?
  • Learn to spend their money wisely?
  • Learn to use and balance a checkbook?
  • Learn to save for college?
  • Learn to set up budgets, etc.?

As you can see, financial literacy is important to have. And, believe it or not, kids are never too young to learn the basics of financial literacy at a young age.

For example, kids love to role-playing and use their imaginations. If they love to play store, they’re already understanding the basics of financial literacy.

And, once your child grows older, you can introduce them to allowances in exchange for completion of chores, homework, or other responsibilities.

12. No College Fund

College is a great thing, especially for your children. Now, while college can be an exciting experience for your child, you might be worried about how you’ll be able to afford it. If you haven’t already been saving money for their college fund, then it’s normal to worry. Therefore, the best time to think about your child’s college venture is when they’re born.

Besides the 529 plan that we’ve discussed earlier, there are other, attractive tax-free college savings options to consider for your child:

  • State-sponsored plans (tax-free as long as the money is used for college costs)
  • Plans managed by a brokerage or mutual fund company (in league with state-sponsored plans)
  • Plans that let your child attend any schools of their choosing
  • Coverdell education savings accounts (which lets you contribute up to $2,000 a year in tax-free accounts, though has limits of $220,000 for couples filing jointly, and $110,000 for singles)

While these plans will not allow you to invest in art, or jewelry, some of these plans let you invest money in a portfolio of stocks and bonds. In turn, these stocks and bonds would gradually get more conservative as your child reaches the age where they can go to college or university.

13. Buying Life Insurance Willy-Nilly

While life insurance is desirable in today’s standards, it’s still important to do your research ahead of time. In fact, you wouldn’t want to be stuck with an insurance policy that won’t help you and your child the slightest, or would cost you a lot for the premium.

Therefore, it’s important to look for insurance that can help you in the following ways:

  • It’ll cover doctor visits and medical bills.
  • It’ll cover things like food and other necessities.
  • It’ll cover child care needs, and so on.

Also, don’t be tempted to buy a lifetime policy that can turn out to be costly, if your child develops a medical condition later in life. Buying a policy for less now will ensure that your child is always insured.

Remember: The last thing you want is to be stuck with an insurance policy that won’t help either you or your child.

14. Ignoring Childcare

While giving birth can be costly by itself, so is childcare. Nowadays, daycare centers can cost an arm and a leg, in order for your child to go there for just one week. Plus, babysitters can be costly, even if you hire them to watch your child for a day.

The good news is, when it comes to childcare, there ARE options. Depending on your income, schedules, and life situations, you should research which childcare options are right for you. Would you rather pay for a daycare center to look after your child? Would you rather hire a babysitter to watch your child? Would you rather have a relative care for your child? Or, would you rather devote your time and energy on childcare? Whatever you choose for childcare is up to you.

Plus, think about why you’re in need of childcare:

  • Are you working full-time or part-time at a job?
  • Are you looking for work?
  • Are you working remotely, and need time to work?
  • Do you need a break from childcare every so often?

By learning how and why you need childcare, you’ll make the right choice when choosing what’s best for you and your child.

Also, look into parental leave in your place of employment. Just keep in mind: While some companies offer paid parental and or maternity leave, other companies won’t.  Therefore, it’s important to talk to your employer about your situation, and how you would like to better care for your child. Now, while unpaid parental leave is bare-minimum for your need to have childcare, you should still look for other options, if you can’t get paid while caring for your child.

15. Make Sacrifices

Finally, it’s time to talk about making sacrifices. As much as it sounds hard to do, it’s still a fact.

Yes, as new parents, you’ll be exposed to many changes in your life. For example, you might find yourself buying more Pampers and baby formula than recreational things like, say, alcohol and video games. That’s totally normal for new parents.

Making sacrifices will be something that you’ll need to do in order to afford things for your baby like clothes, food, medical expenses, and so on. And, just because you’re sacrificing one thing, doesn’t mean that you’ll need to do it forever. Though, if you manage to give up something (i.e., alcohol) for your child, then that might be a good thing.

Plus, when you look to make sacrifices, you’ll be able to teach your child to follow suit. In this way, they would learn how life works, and how they can work towards a goal. Again, while giving something up may seem hard to do, that’s life.


As you can see, being a new parent doesn’t have to be problematic or expensive at all. In fact, many of these mistakes can be avoided by NOT jeopardizing your finances. While not everyone is perfect when it comes to finances, it’s still important to look to the future, especially when it comes to your bundle of joy.

By learning from these 15 common mistakes in new parenting and finances, you’ll not only be smarter with your money, but also provide the best for your child. Good luck, new parents!

This article originally appeared on The Financially Independent Millennial and was syndicated by MediaFeed.org.