Having a child is what many people strive for but when that bundle of joy comes, it can be stressful since you’re trying to figure out how to be a new parent while having to adjust to a bunch of new expenses which you may have not anticipated. Understandably, things can get overwhelming fast, but the key is to manage your expectations.
I know that’s easier said than done and they want to give everything to their children, but that’s not always possible. Follow these tips on how to manage your money as a new parent and you’ll be spending more time with your child and not worrying about your finances.
Redo your budget
If you haven’t already, it’s time to redo your budget. You’ll likely know to adjust your income and to add any expenses related to the baby but you may want to budget a little more for unexpected expenses that will come up. Many people also forget to budget for their child’s Registered Education Savings Plan (which I’ll touch on below) which could increase your budget by quite a bit. Don’t forget to cut expenses too, the odds are you won’t be eating out as much and you may need to reduce your vacation budget temporarily.
Don’t pick up new debt
Babies can be expensive which is why you don’t want to pick up any unnecessary debt. Avoid purchasing the best of every product such as strollers and cribs since they’re high ticket items. The money you save can be put towards other expenses. I’m not suggesting you need to cheap out on everything, but you want to be smart about where you’re spending your money. Some parents also get FOMO when they see other kids with certain items or clothes. Everything you buy doesn’t need to be new. Baby clothes and baby accessories are some of the best things to buy used since they’re usually like new and heavily discounted.
Adjust your shopping habits
I know some people who refused to shop at discount grocery stores or at Wal-Mart because it was below them. I’ve got news for you, those stores often sell the same product as other stores but they’re often much cheaper. Where you shop can make a huge difference on your wallet especially if you combine it with loyalty programs and credit cards. For example, I shop at No Frills a lot which is much cheaper than Whole Foods. I’m also a member of PC Insiders which gives me more PC Optimum points on select items. I then pay with my PC Financial World Elite Mastercard which gives me points on every purchase. Those points are incredibly valuable since I can redeem them for free groceries or merchandise.
Anticipate future expenses
Having an updated budget and adjusting your shopping habits is great, but you also need to factor in future expenses. That could be anything from birthday parties for your kid to saving a down payment for a home purchase. These expenses may not seem random, but many people don’t anticipate them and then run into cash flow problems when it’s time to pay. Having multiple high interest savings accounts has worked for my wife and me since we’re able to save for various things at the same time. By separating everything, we always know what our budget is.
Set up a RESP
Before our daughter was born, my wife and I knew we wanted to set up a Registered Education Savings Plan (RESP) for her. We both value education so we wanted to make sure she had some money available to her if she decided to pursue a post-secondary education. The great thing about RESPs is that you can get a 20% match up to $500 every year from the government thanks to the Canadian Education Savings Grant. This is essentially free money! To learn more about RESPs and how to set one up, read my RESP guide now.
Think about your long-term income
It’s impossible to predict what will happen in the future but you should at least think about it. If one parent plans on staying home for the first few years, then you’ll likely want to start adjusting to life on a single income now. If money is already tight, perhaps one parent will return to work early or on a part-time basis. If that’s the case, see if you have family that can help with childcare. Now is also a good time to think about your future. Do you want to return your job? If not, take the steps to shift your career or to look for a new job.
Use the right credit card
When used responsibly, credit cards can be a useful tool. For example, if you currently hold a balance on your credit card, it may make sense to do a balance transfer to a low-interest credit card since you’ll end up paying less in interest. I already mentioned how a store credit card can help you earn more points, but some of the best cash back credit cards in Canada are also a great option since you’ll earn money back on all your purchases. You basically want to use a credit card that benefits you, but this only works if you’re paying off the full balance every month.