Choosing between Olivia and Emma or Liam and Noah – America’s most popular baby names for the sixth consecutive year, according to the Social Security Administration’s just-released 2024 rankings – might feel momentous.
It’s not.
It’s actually the easiest financial decision you’ll make as a parent.
The hard part? Planning for the estimated $312,000 it costs to raise that precious bundle of joy from birth to adulthood, before factoring in college expenses.
Related: Parents may get a new way to save for their kids’ financial future
Most new parents are woefully unprepared for this financial reality. While you’re sleep-deprived, mastering diaper changes, and debating the merits of different pacifier brands or strollers, you’re also expected to make complex financial decisions that will impact your family for decades.
You’re not alone in feeling overwhelmed. That’s precisely why financial experts emphasize breaking down these critical tasks into manageable priorities. The name you choose might follow your child for life, but the financial foundation you establish will determine the opportunities available to them.
How to plan for the estimated $312,000 it will cost for parents to raise a newborn.
Image source: Keren Fedida/Unsplash
Financial moves to make when you have a baby
What do financial planners who work with new parents emphasize most? Not college savings. Not investment strategies. Not even budgeting for baby expenses.
Their top concerns are life insurance, estate planning, and identity protection—basic safeguards that too many parents delay implementing.
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“Life insurance is important to revisit,” said Elizabeth Scheiderer, a certified financial planner with Signal Tree Financial Partners. “Most often new parents are interested in purchasing term insurance for income replacement to help with childcare costs and college funding.”
Ryan Salah, a certified financial planner with Capital Financial Partners, likewise advises parents to “purchase inexpensive term life insurance” as an immediate priority. Term life insurance, which provides coverage for a specific period, often 20 or 30 years, typically offers the most affordable protection. A healthy 30-year-old might secure a $1 million, 20-year term policy for approximately $40-$50 monthly.
Related: Social Security income tax cuts may include a huge new deduction for retirees
Though difficult to contemplate when celebrating a newborn, estate planning is perhaps the most critical task.
“Execute a will and determine a guardian for your child should an unexpected death occur,” said Laura Rhoades, a certified financial planner with Savant Wealth Management. “Many parents will delay implementing an estate plan because they cannot pick a guardian. However, if you cannot decide and something happens to you, the court will make the decision for you.”
For his part, Gregory Guenther, a certified financial planner with GRANTvest Financial Group, who recently became a father himself, notes that young parents often focus on the wrong priorities.
He’s seen clients fixate on college funding before establishing basic protections: “When parents welcome a newborn, there are many important family planning updates that should be considered,” Guenther said. “It’s essential to review insurance coverage to ensure life and disability policies adequately protect against income loss and to update health insurance to include the new child.”
Even identity protection requires immediate attention. Julianne Erhart-Graves, a certified financial planner with Worley Erhart-Graves Financial Advisors, highlights a step many parents overlook.
“One important step new parents can take for their child is placing a credit, or security, freeze at the three major credit bureaus – Equifax, Experian, and TransUnion,” she said. “A credit freeze can help protect the child’s identity from identity thieves.”
Meanwhile, health insurance demands immediate action. “You have 30 days to get your child on your health insurance after birth during the special enrollment period due to the life event of the birth,” said Yesenia Realejo, a certified financial planner with Tobias Financial Advisors. Miss this deadline, and you could face significant financial consequences.
For her part, Francheska Ruiz is mother of a 19-month-old and is currently seven months pregnant. “Baby tasks are always on my mind,” said Ruiz, who is also a certified financial planner with Tobias Financial Advisors. “With another baby on the way, my husband and I are shifting our focus from day-to-day survival to long-term legacy.”
Her perspective reinforces what many experts observe: new parents must balance immediate needs with long-term planning, often when they’re least equipped to do so.
Key money moves for new parents
Here, according to experts, is your prioritized financial roadmap for the first year of parenthood:
First 30 days: Critical deadlines
Add your child to your health insurance immediately. “You have 30 days to get your child on your health insurance after birth during the special enrollment period,” warns Realejo. This non-negotiable deadline prevents coverage gaps for your newborn.Secure your baby’s Social Security number, ideally while still at the hospital. This identification is required for health insurance, claiming your child as a tax dependent, and opening financial accounts in their name.Place a credit freeze with all three major credit bureaus. As Erhart-Graves advises, “Each credit bureau has their own process for implementing a freeze for a minor, so you must look up and follow the requirements for each bureau, but it’s worth it for the peace of mind.” This step, she said, prevents fraudsters from opening accounts using your child’s identity.Evaluate and purchase adequate life insurance. Term life insurance offering coverage of 10-15 times each parent’s annual income provides affordable protection. “For new parents I’d recommend to review with a financial planner before an insurance agent to see the impact of the premiums and the loss of income have on a long-term plan,” said Ruiz.
First 90 days: Foundational protection
Create or update your will and establish guardianship. Kris Etter, a certified financial planner with Beacon Financial Planner, recommends putting in place all the requisite estate planning documents. “Who has durable power of attorney to make financial and health care decisions should one or both parents become incapacitated?” he asked. “Who will become guardian should both parents pass while the child is a minor?” Consider too the benefits of a trust. “We often see revocable trusts set up as primary beneficiary on life insurance policies, making sure the child’s interests are protected should the surviving spouse ever remarry,” said Etter.Review and update all beneficiary designations. Examine retirement accounts, existing life insurance policies, and investment accounts to ensure they reflect your new family situation. Ruiz advises looking at “how all of our financial accounts are titled; whether they’re in single name, jointly held, or should be placed in a trust.”Expand your emergency fund. Guenther suggests maintaining “six to 12 months of living costs, depending on a specific situation.” With a child, this safety net becomes even more critical.
First year: Building for the future
Assess disability insurance coverage to protect against income loss, which Nathan Sebesta, a certified financial planner with Access Wealth Strategies, identifies as essential for families relying on dual incomes.Evaluate tax advantages through dependent care FSAs and the Child Tax Credit. As Guenther notes, parents should “consider adjusting tax withholdings to account for potential credits like the Child Tax Credit.”Create dedicated savings for child-related expenses. Before focusing on college, establish funds for more immediate costs. “We set up (for a client) a targeted savings account for immediate expenses like daycare and medical costs,” said Guenther.Explore education funding options strategically. Scooter Thomas, a certified financial planner with Savant Wealth Management, cautions that “529 is definitely not a first step… opening a financial account can wait for at least a few months.” When you’re ready, however, Paul Penke, a certified financial planner with Ironvine Capital, suggests looking beyond the obvious “Most people immediately think of 529 plans for college education,” he said. “However, Educational Savings Accounts (or ESAs) should be considered, too.”
Why it matters to establish a financial foundation for your kids
The financial foundations you establish now will profoundly shape your child’s future. While the $312,000 cost of raising a child might seem overwhelming, breaking these tasks into manageable priorities creates protection and opportunity.
Ultimately, while you might agonize over choosing between Liam and Noah or Olivia and Emma, implementing these financial priorities will have a far more profound impact on your child’s life journey. The good news? You don’t have to accomplish everything immediately.
Some financial planning, said Thomas, “can wait for at least a few months.”
Related: How the IRS taxes Social Security income in retirement
