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And Baby Makes 3: Financial Fundamentals for Your Growing Family

Everything changes when a child enters the picture, from your routines and your priorities, to your idea of a “quiet night.” And right alongside those shifts comes a new financial reality. Whether you’re prepping a nursery or already knee-deep in baby wipes, now is the time to lay a solid financial foundation for your growing family.

Rethink Your Budget (Yes, Again)

Even if you’ve been diligent about budgeting in the past, a new baby requires a fresh look. Citing information from the Brookings Institution, Investopedia recently reported that the average cost of raising a child to age 17 for a middle-income family with two children is approximately $310,605. It’s not just about buying a crib or stocking up on onesies. It’s about preparing for ongoing expenses like childcare, medical costs, and future education needs.

With your financial landscape growing increasingly complex, taking a comprehensive approach to your budget now can help set the stage for the kind of future you want to create. Start by identifying new recurring costs: diapers, formula, pediatrician visits, baby gear, and possibly reduced income if one partner takes parental leave. If you’re planning on childcare, get quotes early, as costs vary widely and can be one of the biggest expenses in your child’s early years.

At the same time, look for areas where spending might naturally decrease. Maybe you’re dining out less or taking fewer trips. A good rule of thumb: your budget shouldn’t just reflect your life before baby, but should evolve with it.

Review and Update Your Insurance

Your growing family means it’s time to think seriously about protecting what matters most.

  • Health Insurance: Add your child to your health plan as soon as possible—most insurers have a deadline (usually 30 days after birth). Review your plan to ensure it covers well-child visits, immunizations, and any unexpected needs.
  • Life Insurance: If something were to happen to you or your partner, would your family be financially secure? With greater wealth often comes greater responsibility, and ensuring your family’s security is critical. Term life insurance can be an affordable way to provide peace of mind.
  • Disability Insurance: Many families are financially reliant on one or both parents’ incomes. If an illness or injury prevents you from working, disability insurance can help cover everyday expenses while you recover.

Build (or Rebuild) Your Emergency Fund

An emergency fund isn’t just for car repairs or surprise bills. It’s the financial cushion that can keep your family afloat in uncertain times. As your wealth grows, so do your financial obligations. Aim to set aside three to six months’ worth of living expenses in a separate, easily accessible account.

With a baby in the mix, this fund becomes even more essential. Kids get sick. Jobs change. Life throws curveballs. The security of knowing you can weather a storm makes a big difference, especially during a sleep-deprived season of life.

Start Thinking About Education—But Don’t Panic

It might feel premature to think about college before your baby is out of diapers, but time is your greatest asset when it comes to long-term savings. If it aligns with your financial goals, consider opening a 529 college savings plan. These accounts allow your contributions to grow tax-free, and withdrawals for qualified education expenses are tax-free as well.

That said, don’t let college planning derail your retirement savings or emergency fund. You can’t borrow for retirement, but your child may have options for scholarships, grants, or loans down the line. Striking the right balance is key.

Get Your Estate Plans in Place

No one wants to think about worst-case scenarios, but part of responsible parenthood is preparing for the unexpected. An estate plan helps ensure your child is cared for and your wishes are honored, even if you’re no longer around to express them.

At minimum, consider naming a guardian for your child in your will, designating beneficiaries on retirement accounts and life insurance, and establishing a trust if appropriate for your family. It’s not meant to be morbid. Think of it as love in legal form.

Embrace the Long View

There’s no denying that having a baby changes every aspect of your life, including your financial outlook. And that’s okay. The goal isn’t to have all the answers right now, but to start building a foundation that can grow alongside your family. As you continue to expand your wealth and make more significant financial decisions, taking a thoughtful, long-term approach can help serve both your immediate and future needs.

At Grunden Financial Advisory, Inc., we understand that financial planning is about more than numbers—it’s about values, dreams, and the people you love most. Whether you’re navigating a new season of parenthood or simply wondering what your next step should be, we’re here to help you make decisions with clarity and confidence.

Parenthood is a journey. Let’s make sure your finances are ready for the ride.

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