How new parents can be smart about money

Congratulations! You are about to become a new parent. Now, your life is going to change and your finances along with it.

Many parents are unprepared for the cost of raising a child. There are many new expenses associated with newborns, from diapers to car seats — and even more expenses to anticipate as your child grows. How are you going to pay for child care? What about summer camp? Is it even possible to save for college?

Budgeting for new parents may seem complicated, but Bankrate has six tips to help prioritize achieving your financial goals. In addition, home equity sharing agreements can help you cover the cost of raising a child — and a service like Unlock, which lets you access a portion of your home equity in advance, could be what you need to manage new expenses, pay off old debt and save for your family’s future.

Costs of being a new parent

How much does it cost to raise a child? Every family’s expenses is a little different, but the average cost of raising a child from birth through age 17 is about $233,610, according to 2015 data from the U.S. Department of Agriculture, the most recent available. The figures, released in 2017, show the cost of raising a child is about $12,978 a year — or $1,082 a month.

Those figures suggest new parents may need to examine how to manage their money. Many young families face significant financial hurdles, including how they’re going to pay for child care or how much money they’ll need to set aside for college. If you’re wondering how you’re going to cover an extra $1,082 monthly expense — not to mention the $233,610 until adulthood — there are simple thing you can do to help foot the bill.

Ways to manage money when raising a child

New parents need a new way of dealing with their finances. Some parents are able to save money for their new baby in advance, but still need help dealing with the challenge of setting aside money for college while saving for retirement. Other parents may be wondering how to balance diapers and debt repayment.

Whether you feel confident about your finances or confused about what to prioritize,  Bankrate can help. Want to know how to manage your money while raising a child? Start with creating a budget, building an emergency fund and getting life insurance. Then, you can begin setting aside discretionary income for debt repayment, college costs and retirement contributions. These six strategies can help you prepare yourself — and your child — for whatever the future may bring.

New budget

If you’re raising a new child, you may need a new budget. Budgeting for new parents can seem overwhelming, especially if you’re not sure how much it will cost to keep up with the diapers, onesies and age-appropriate toys, but the process of creating a new budget is fairly simple.

Start by downloading a budgeting app to help you track monthly expenses by category. Once you understand where your money is going every month, you can begin making adjustments. By cutting back on restaurants and entertainment, for example, you can put more money toward savings or debt repayment. Take advantage of coupon apps that allow you to save money on everyday purchases, as well as credit card rewards that can be applied towards your monthly credit card bill.

Emergency fund

When setting up a budget, include a monthly contribution to an emergency fund. Ideally, it will include enough money to cover three to six months of expenses. Some new parents may find it difficult to set aside that much money while simultaneously raising a child, so start small. Begin with $500, which could be enough to help you cover at least some emergency expenses, then work toward $1,000.

Also consider downloading a money saving app that automatically transfers small amounts of money into your savings account. Some of these apps even round up each purchase and put the extra pennies into savings — every penny counts.

Life insurance

Consider a good life insurance policy the ultimate emergency fund — an essential component of the cost of raising a child. Life insurance can help your family cover everything from mortgage payments to college tuition, not to mention the expenses associated with funerals and burials.. The best life insurance for new parents offers affordable premiums and enough coverage to ensure that your family is protected no matter what happens to you.

Debt relief

Once your day-to-day finances are in place, and you’ve set up an emergency fund and a life insurance policy, then you can focus on your long-term financial goals. Start with debt repayment, especially if you are dealing with high interest debt and high monthly payments.

Some consumers are able to pay off debt by consolidating their credit card balances under a balance transfer credit card. Others may benefit from alternative debt repayment strategies, including working with Unlock to put a portion of your home’s equity into paying off your debt. Whatever debt repayment you choose, keep at it — once you’re debt free, you’ll be able to put even more money toward your family’s future.

College fund

College can be one of the biggest costs of raising a child, so it’s a good idea to set up your child’s college fund as soon as possible. The several ways to save money for college include investing in a 529 plan or looking for a state school that offers prepaid tuition options. You can also ask relatives, especially grandparents, to contribute to the expense. When your child is old enough for a part-time job, invite them to make their own contributions. The more money your family saves in advance, the less you and your child may have to pay in student loans.

Retirement planning

The last item on our list of financial tips for new parents has a lot to do with planning your family’s future. How much money do you think you might need after you retire, and how much do you currently have saved for retirement? Many people discover they aren’t saving enough, so use Bankrate’s retirement calculator to see how your retirement savings stack up to your long-term financial needs.

Saving for retirement now can set you up with financial security that benefits not only yourself but also the next generation. Think about how old your children might be when you retire. Will you need their help to stay afloat financially, or will you have enough money saved that you can live comfortably?

How Unlock can help with the load

Unlock is a home equity sharing company that allows you to unlock a portion of your home’s equity in advance. Unlike home equity loans or HELOCs, Unlock gives you the ability to tap into your home’s equity without paying interest — in fact, you won’t need to make any monthly payments at all.

How does Unlock’s home equity sharing agreement work? It’s simple. Unlock offers you a portion of your home’s equity, in cash now, in exchange for a share in the total value of your home later. In a typical agreement, Unlock could offer you 10 percent of your home’s equity today, in exchange for 16 percent of the proceeds of your home when you sell. Ten years is a common agreement term, and you need to have at least 20 percent equity in your home to qualify.

By unlocking a portion of the cash value of your home, you can take advantage of your home’s equity when you need it most. Whether you use that cash to build your emergency fund, pay off your credit cards or contribute to college and retirement plans, you’ll be better prepared to cover the cost of raising a child without taking on additional debt or missing out on important savings opportunities.

For many new parents, this option could make a significant impact in their ability to pay off debt, cover child care costs or save for the future. Read Bankrate’s Unlock review to learn more on how Unlock’s home equity sharing agreement can help you manage your finances — or get started with Unlock to see how much of your home’s value could go toward funding your new expenses.

The bottom line

The cost of raising a child is often more than new parents are anticipating — but with a good budget and a clear set of financial priorities, you can balance everything from emergency funds to retirement savings. If you need additional financial help to maintain that balance, Unlock’s home equity sharing agreement lets you access a portion of the cash value of your home when you need it most — with no monthly payments and no interest fees. You could end up with more money, less stress and more time to spend with your growing family.