As any parent will tell you, having kids can be tough on your wallet. According to the U.S. Department of Agriculture (USDA), the cost of raising a child to the age of 18 works out to around $233,610, give or take, at the moment. That sum of cash covers housing, food, child care, and education, among other necessities. But it doesn’t cover the cost of college, which can be tens of thousands of dollars on its own.
New parents would be wise to avoid a financial panic and start planning for a financially fruitful future instead. Here are some money moves new parents can make that could make the financial toll parenting takes a lot easier to handle. (See also: Can You Afford to Have a Baby?)
1. Start using a monthly budget
Before you have kids, it’s easy to justify spending money on fun. If you’re meeting your savings goals and keeping up with bills, why not go out with friends, or spend your excess cash traveling to see the world?
While there’s nothing wrong with living a little, having children gives you an entirely different perspective. New and often unexpected expenses come with being a new parent. The best way to stay on track financially is by starting a monthly budget and sticking to it. Start with how much you’re currently spending, and use your best guess for new baby expenses like diapers, clothes, and toys. You may have to revisit the budget every few months as those expenses change. Create a budget that sets limits on spending with the goal of saving more. (See also: 15 Unexpected Expenses of a New Baby)
2. Set up an automatic savings plan
Speaking of saving more, parenthood has a way of ruining your big ideas. You might think you’re going to take the excess cash in your checking account and move it to savings, but then your kid needs medicine, your nanny share family drops out, or it’s time to graduate to a toddler car seat and stroller.
The best way to ensure the additional expenses of parenting don’t thwart your savings plans is to make all your savings automatic. Set up automatic contributions or transfers to savings as part of your monthly budget, then learn to live on the rest. (See also: 24 Tips for Having a Baby Without Going Broke)
3. Learn to live on less
“Learning to live on the rest” may not sound like fun, but it’s probably your best bet if you want to stretch your income as far as it can go. The more you can go without or cut from your budget, the more cash you’ll have to save for the future or spend on planned activities that might enrich your children’s lives.
“A penny saved is a penny earned” is never truer than when you have kids. It takes time to earn money, whereas saving money may not take any time at all. If you want to make your dollars and time count as much as possible, it can pay to learn to live on less and be more thoughtful when it comes to spending the money you’ve taken time to earn.
4. Build an emergency fund
Having kids often means recovering from one financial “emergency” after another. Kids get sick. They need to go to the doctor. They might break an arm playing on the playground or crashing their bike into your car.
Kids also need braces and money to play on the soccer team. You’ll need cash for once-a-year expenses like supplies and school field trips. And let’s not forget about all the other emergencies you need to prepare for in life — the leaking roofs and the cars that need to be replaced.
To prevent these expenses from wrecking your savings, or worse, put you into credit card debt, it is essential to start building an emergency fund early — before you need it. Most experts suggest you have three to six months’ worth of expenses saved.
Since that will take a while, you should probably start saving in whatever increments you can, as soon as you can. (See also: 7 Easy Ways to Build an Emergency Fund From $0)
5. Pay off debt
Debt is such a drag, and that’s true whether you have kids or not. When you’re in debt, you have to plan your entire life around paying money to people you owe.
Not only that, but high interest debt can make getting ahead financially an especially tough hill to climb. When you carry a balance every month, you could be paying oodles in interest each month — that’s basically money down the drain.
To make your income stretch as far as it can go, pay down debt while you can. Not only will you avoid the costly drain of interest payments, but you’ll free up extra money to save for what matters. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)
6. Start saving for college
According to College Board, the average cost of a four-year degree could be as much as $152,753 in 18 years. That’s a wild amount of money to ponder, but it won’t be funny if you sit on this data and never act.
Opening a college savings account could help you make a dent in your child’s future tuition costs, but only if you start savings early. If you set aside even $50 per month for the next 18 years and earn a 6 percent return, you could save up $18,543.39 for school. Boost that amount to $200 per month, however, and you could have $74,173.57 saved.
Depending on your state, you may even score tangible tax benefits for setting money aside. In the state of Indiana, for example, you get a 20 percent tax credit on the first $5,000 you contribute every year. (See also: The 9 Best State 529 College Savings Plans)
7. Buy (more) life insurance
A final money move for new parents is buying a life insurance policy — or even buying more life insurance coverage to supplement the coverage they already have.
Before you have kids, you may only need enough life insurance to cover burial costs and your debts. After kids, on the other hand, you have so much more to plan for. You have to buy enough life insurance to replace your income for your child’s entire life, for example, and you may even want to buy more coverage to pay for college.
You have to think about the prospect of your spouse or partner raising your child alone, and what kind of financial situation you would want to leave them in if you died.
Having a child makes issues like life insurance dramatically more important than they were before. You don’t just have to think of yourself; you have to think of their future, too.
Fortunately, it’s easier than ever to get a free quote for life insurance and buy a policy today — and without ever leaving your home. The sooner you buy, the sooner you can protect your new family if for some reason you’re not around.