Oh, Baby! 5 Ways to Save When You’re Starting a Family

If we all waited until we were financially secure enough to start a family, the human race would die out.

OK, maybe I’m exaggerating a little, but even amid the current uncertainties, at least one thing remains true: Starting a family costs money. And if you’re not careful, you can end up in a lot of debt. 

The Baby Center has a first-year calculator to help you estimate how much you’ll spend in the first year alone — think double digits. And when you figure in the ongoing costs of childcare, future school tuition and the endless number of shoes they’ll outgrow in six weeks, it can really start to add up.

But don’t panic (at least, not about the shoes), because we have some helpful strategies for avoiding debt when starting a family.

5 Ways to Avoid Debt When You’re Starting a Family

Kids are expensive.

OK, that’s not exactly a news flash if you’re a parent. But if you’re a new parent — or about to become one — you might just be starting to realize how much of a money vacuum that little cherub is going to be.

Here are five money management strategies so you don’t end up in debt.

1. Front Load Your HSA

Do you have a birth plan? Does it include increasing your Health Savings Account contributions?

If you’re on a high-deductible insurance plan, piling up tax-free savings in your HSA is a great way to avoid having the delivery send you into medical debt. 

Even if you’ve had your HSA for a while and think your savings are in pretty good shape, well, maybe add a few extra contributions anyways, advised Alexandra Wilson, a Certified Financial Planner and mom of a newborn.

“I have a young child, and I would love to use the HSA as just a savings account, but we end up emptying it out every six months, it seems,” Wilson said. “We’re hoping once she gets older, maybe we can actually focus on saving in there instead of having the money go in and the money go out every year.”

2. Open a 529 Account

You’re still trying to figure out how to afford a crib and a bassinet (pro tip: Don’t buy both). How can you possibly think about paying for college?

Well, student loan debt topped $1.5 trillion this year, and you don’t want junior saddled with that kind of burden just as he’s launching into adulthood.

The good news is that there’s an investment vehicle specifically designed for education expenses: a 529 savings plan. It offers tax-free growth and tax-sheltered withdrawals for many educational expenses, including college tuition, K-12 private school tuition and apprenticeship programs. 

And yes, if the recent stock market ride has given you a tummy ache, investing your hard-earned money might not seem like the best choice. 

But if you’re opening a 529 for a newborn, that money should stay in your account for at least five years — if you’re using it for a private elementary school — and potentially 18 years — if you’re using it for college. That’s a long time for your money to recover from the current market rollercoaster.

If you start investing soon enough — even if it’s small amounts — you can help your kids pay for college without going into debt yourself. 

3. Start an Emergency Fund

When my daughter was six weeks old, the baby bouncer’s batteries died in the middle of the night. In my sleep-deprived state, I attempted to change the batteries but unwittingly opened the main gear department instead. Wires and connectors tumbled from the case, and I promptly had a breakdown as I realized I’d have to spend another $25 on a replacement bouncer from the used baby gear store.

Moral of the story: Expect unexpected costs when you have a kid. 

Yes, you may have your financial plan all set for baby’s arrival, but what if your grand plan to save money by breastfeeding goes bust when your little one won’t latch on? Or it turns out your little bundle of joy is lactose intolerant and needs the pricy formula?

Or, I don’t know, a pandemic hits?

And don’t even get us started on pinworms, nursemaid’s elbow or hand, foot and mouth disease. All of these medical events can add up to a lot of “emergencies.”

We have plenty of tips for starting an emergency fund. And if you’re still in the prep stages for starting a family, consider taking on a short-term side hustle to build up the emergency savings before the baby sucks up all your former free time.

Adding extra dollars to your emergency fund may seem like a luxury, but you’ll appreciate the cushion right around your third trip to the pediatrician — in one month.

4. Set Up Automatic Payments

Baby brain is so real.

Even if you previously kept a mental checklist of your payment schedules, today should be the day you think about going automatic.

Automatic payments allow you to avoid penalties and late charges for bills that slip your mind somewhere around the 3 a.m. feeding. 

One option to make it easier to remember when you’re paying is to use the paycheck budgeting method — it allows you to allot payments and savings according to when you get your paycheck.

If you’re using a credit card to pay for baby gear, consider switching to a biweekly payment schedule. You’ll avoid accruing additional interest and make a bigger dent in your overall debt.

5. Don’t Forget: Your Baby Won’t Remember Any of This 

I’d like to say that the first year is so memorable — and in some ways it is because you photograph and videotape every other second of it. But for the most part, a lot of your memories fade away (probably due to the whole sleep deprivation thing).

And guess what? Your kid won’t remember any of it. Not one thing.

So before you buy out Amazon for Christmas presents or book a professional flamethrower for your kids’ first birthday party (seriously, don’t do that even if you have all the money in the world), realize that there will be a lot of big moments in your family’s life. None of them should send you into a financial tailspin.

So whether it’s a holiday or just her 6-month birthday (that’s a thing?), here’s how to avoid going into debt for major life events. 

They’re only young once, and a secure financial future will let you enjoy each moment with a little less stress. 

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.