May 26, 2020

Are you a soon-to-be parent? If so, you may be wondering how your new role will impact your budget. According to a 2017 report from the U.S. Department of Agriculture, the average cost of raising a child (from birth through age 17) is $233,610. If that number sends you into a panic, don’t fret. Here are a few steps you can take now to help you save some money and better prepare your budget (and your future) for your child’s arrival.

Get used to living on one income…

If your plan is for one parent to stay at home with your new baby, adjust to life on one income as early as possible. Automatically deposit the future stay-at-home parent’s full paycheck to a LUSO savings account while you’re both still working to help you readjust your budget before adding the stress of a new baby into the mix. By switching up your budget as soon on as possible, you can identify cost savings measures early on and create a seamless transition into life on a single income. Plus, by banking the other parent’s full salary, you’ll have a nice nest egg of money saved up for your little one’s arrival and you won’t have to dip into your emergency fund!  

…Or plan for childcare expenses

If you’re unable to stay home with your new baby, you might be looking at childcare options. Typically, most families choose between in-home care (with an au pair or nanny) or in-center care at a licensed daycare center. With an au pair/nanny, a child can be cared for in his or her own home environment. Oftentimes with this care option, the caregiver will also perform light housework duties (such as laundry or light cleaning) while the child naps. With daycare, a child is brought to a facility where other children are also being care for. According to a 2019 report by, in Western Massachusetts, in-home care cost roughly $30,000 per year, while in-center care cost about $12,000. If that cost seems high, consider that you may be able to claim this expense on your taxes if you’re utilizing childcare in order to work. Be sure to ask your tax professional if this deduction is available for you.

Update your health insurance plan

Did you know the birth of a new child counts as a qualifying life event that allows you to update your employee benefits like health insurance? Since you’ll likely be increasing doctor visits and check-ups, consider lowering your deductible and making higher monthly payments. Or it might be worth switching to a high-deductible insurance plan so you can contribute to a Health Savings Account (HSA), which lets you put aside pre-taxed dollars that you can use toward your deductible and other qualifying medical expenses.

Consider baby subscription services

If there’s one thing we know for sure, it’s that babies will use a lot of diapers. The average baby goes through six to 10 diapers a day, which, according to the National Diaper Bank Network, can set you back $70 to $80 per month, or about $900 a year. And if you choose not to breastfeed, formula can cost you an additional $150 per month, or about $1,800 a year. The good news is companies such as Amazon offer delivery discounts for repeat subscriptions on products like diapers/wipes, and formula.

Evaluate your budget regularly

If you’re concerned about your budget after baby, be sure to evaluate regularly once he or she arrives. Your budget will fluctuate as your baby moves into and out of various stages of life. For example, when your child begins eating solid food or using the potty, you can save on formula and diaper costs. If you’re paying for weekday childcare costs for your toddler so you can go to work, you’ll likely save a significant amount of money when they begin school. Speaking of school, don’t forget to account for school-related expenses in your budget. You’ll have to purchase clothes and supplies for your child, as well as tuition if you elect to enroll them in private school.

Start a 529 Savings Plan

While you’re holding your newborn in your arms, you might not be thinking about the day he or she heads off to college. But it’s important to start planning now for that eventuality. Consider a 529 Savings Plan to grow your money tax-free so that when your child is ready to head off to college, the funds in the account can be spent on tuition, books or other qualified expenses. Contact Community Financial Services at LUSO Federal Credit Union to learn about your options and set up a 529 Savings Plan.

LUSO Federal Credit Union is a not-for-profit, member-owned financial cooperative dedicated to providing members with quality financial services and products. We at LUSO pride ourselves on serving the financial needs of our members and helping them save for the special occasions in life.   

Feel free to contact our Ludlow or Wilbraham branch toll free at 1-844-LUSO-FCU.

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