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Updated on Monday, March 30, 2015
Being a dad is awesome. It’s also the hardest thing I’ve ever done.
And the truth is that even with my financial background, it was the money side of things that stressed me out the most, particularly in the months before our first son was born. There were just so many new decisions to make and I didn’t feel confident that I was making them correctly.
But I’ve learned a lot along the way, and today I want to share the 5 most important tips I would tell a new dad worrying about money just like I was.
1. A Little Bit of Savings Goes a Long Way
For me, the hardest part of being a first-time parent was that EVERYTHING was new. My entire routine was thrown off by all the new responsibilities I had to handle, and I honestly just felt overwhelmed by it all.
But one thing I didn’t have to worry about was whether I’d be able to pay the bills each month. We had a savings cushion in place, and that meant I could afford to make some spending mistakes without jeopardizing my family’s financial security.
Building that savings cushion can be tough, but I give the same piece of advice to every expectant parent I work with.
If you can, start living on your expected baby budget BEFORE the baby actually gets here. In the meantime you can funnel all those baby expenses into a savings account, which will do two big things for you:
- Get you used to the new budget before the baby gets here (and chaos ensues), and
- Build up that savings cushion.
You can make sure your savings cushion is getting the highest interest rate by putting your money in an account earning 1.00% or higher.
2. A baby doesn’t have to cost a fortune
Okay, I’ll get this part out of the way first: if you’re paying for daycare, then YES, that can cost a lot of money.
But beyond daycare, the truth is that new babies actually have very few needs. Some diapers and wipes. Maybe formula. A couple of basic outfits. A car seat.
And honestly, for the most part that’s really it. Most of the rest of it is just marketing that’s designed to scare you into thinking that you’ll fail as a parent if you don’t have all the latest gear.
You won’t. Your baby would be as happy as a hipster in Brooklyn with nothing but your love and attention, and neither of those things cost a penny.
3. Automation is your friend
Remember all those new responsibilities I talked about above? They’re going to be taking up most of your time and that will make it hard stay on top of your little financial responsibilities, like paying bills on time and hitting your savings goals.
That’s why automating as much of your financial system as possible will make your life a whole lot easier.
Certain bills, like your rent, electricity and water, simply have to be paid on time. They not only keep the lights on, but those on-time payments will help you avoid late fees and keep your credit report in good shape. Putting them on auto-pay will make sure they’re handled no matter how chaotic your life gets.
And then there’s your savings. A lot of new parents tend to pause or decrease their long-term savings, but it’s important to remember that your savings rate is the single most important factor in reaching your long-term financial goals. The more you can automate your savings, the more you can consistently work towards your most important financial goals.
4. Learn to love a good insurance policy
Insurance gets a bad rap, and in many cases that reputation is well-deserved. There are a lot of salesmen out there willing to sell you any policy that earns them a fat commission, regardless of how well it actually fits your needs.
But good insurance is priceless for the simple reason that it allows you to protect your family from financial catastrophe.
Health insurance will pick up the tab for those really big medical bills, especially the ones that are ongoing.
Term life insurance will replace a working parent’s income, or will bear the cost of replacing all the duties of a stay-at-home parent (like childcare, cooking, cleaning, etc.).
Long-term disability insurance will replace your income if there’s ever an extended period of time where your health prevents you from working.
And liability insurance will pay the damages if you ever accidentally injure someone or damage their property (like in a car accident).
These are all things that would be difficult or impossible for most of us to handle on our own, which is exactly why good insurance is so valuable.
5. Everyone struggles. Don’t be afraid to ask for help.
No matter how much you know or how much prep work you do, the transition to fatherhood is going to be tough. In between all the amazing moments like your baby’s first laugh, holding her while she sleeps, and that time she pukes all over your best friend, you’ll go through plenty of financial and emotional stress.
Just know that it’s normal. Everyone has the same worries, fears and struggles, and everyone makes mistakes along the way. You are NOT alone.
So when times get tough, don’t be afraid to ask for help. Whether it’s friends, family, professionals or even online forums, there’s always someone who’s been through what you’re going through and is willing to lend a hand. All you have to do is ask.