The 8 Most Important Financial Steps a New Parent Can Take

The 8 Most Important Financial Steps a New Parent Can Take

Photo courtesy of Kenny Louie

As a new parent, you’ve got a lot on your plate.

Diaper changes. Late nights. Early mornings. Feeding schedules. Nap schedules. At least a few moments where you feel like you don’t know what the heck you’re doing.

Oh, and somewhere in there are a few new financial responsibilities as well.

You already have plenty of new things to figure out, and I don’t want the money stuff to be part of the confusion. I want it to be as easy as possible for you to not only know which financial tasks are important, but how to do them.

So, here are the 8 most important financial steps a new parent can take, with plenty of advice on how to take them. If you can handle these, you can rest easy knowing your family is in good financial shape.

1. Build a cash cushion

Having some cash set aside to handle the unexpected is a good idea no matter what, but it’s especially helpful when you’re going through a big life change like having a child. You’re going to be dealing with a lot of changes, both in how you’re living and in how you’re spending, and having some extra savings will let you navigate them without worrying about is where the money is going to come from.

Here are some posts that will help you build a cash cushion slowly but surely:

2. Create a system to manage your saving and spending

You want some kind of system in place to make sure that you have enough money to spend on the essentials, hit your savings goals, and still have at least a little bit of fun.

This is where most people would recommend making a budget. Not me.

I have my own system for managing my spending and saving, and it doesn’t involve keeping a traditional budget. You can read all about it here:

3. Write wills

Most importantly, a will lets you dictate who would care for your children in the event that both parents passed away. Otherwise that’s left up to the courts to decide.

For more information on getting your wills and other basic estate planning in place, check out these two posts:

4. Get life insurance

Life insurance is one of the best ways to make sure your family has the financial resources it needs no matter what. It’s also one of the sleaziest industries out there and it can be really hard to know who’s trustworthy and who’s trying to swindle you for a quick buck.

My wife and I made our own mistakes when buying life insurance for ourselves, but over the years I’ve learned a lot and I want to help you do it right. This guide will help you get the coverage need at a price that fits your budget:

5. Get health insurance

You may not have any choice here if your employer only offers a single plan. But some employers give you multiple options, and for the self-employed or unemployed it can get even more confusing.

If you need to find health insurance outside of an employer, your first stop should now be This is the home of Obamacare, and it will lead you to the site for your state’s health insurance exchange. And let me tell you from personal experience, the process here can take a long time so the sooner you can do this the better.

Another way to look for health insurance is to find an independent health insurance agent in your area. If you can find a good one, they can help you understand all the different terminology and evaluate which options might be best for your situation. That isn’t an easy thing to do, so having some help can be great. But make sure to ask them which insurance companies they do and do not represent. You’ll want to make sure you have the full range of choices.

With my recent move to self-employment, we’ve been going through the process of finding health insurance and it certainly isn’t easy. For some thoughts on how to compare different policies, you can read this post:

6. Get disability insurance

This is one of the most overlooked types of insurance out there. Disability insurance will replace some or all of your income if you’re unable to work for an extended period of time because of medical issues, which is much more common than you might think. The truth is that if anyone depends on your income, including yourself, you should be thinking about disability insurance.

This comprehensive guide will help explain what disability insurance is, why it’s important, and what to look for in a policy: Disability Insurance: The Crucial Protection You Probably Don’t Have.

7. Up your liability insurance

Liability insurance is another one that often gets overlooked. Basically, this will cover you in case you accidentally injure someone or damage their property. It’s already a part of both your auto and homeowners/renters policies, but chances are that you’ll want to increase your coverage. You can also buy some extra coverage on top of those policies, which is a good idea in a lot of cases.

Here’s a post explaining more about what liability insurance is and how it works:

8. Define what it is you’re working towards

Each of these things is important, but in the end money is only valuable if you can use it in a way that creates happiness. Which means that completing a checklist of to-do’s is only a starting point. The end point is your vision for what you want out of life.

Whenever things with the new baby start settling down and you have a chance to come up for air (it may be a little while), take some time to think about the life you want to build for your family. It’s that vision that will give your financial decisions a purpose and will make it easier and more enjoyable to actually follow through.

If you’re not yet sure what that vision looks like, here’s a process that can help you figure it out:

Take it one step at a time

If you can get these 8 things handled, you’ll have set a really solid financial foundation for your family. There are still next steps to take (things like investing and planning for college), but those will build on the foundation you’ve created here.

Still, don’t feel like you have to get all of these things done all at once. Whether you need to handle just one of them or all eight, the most productive thing you can do is spend each day trying to take one small step forward on just one item. If you can make just a little bit of progress every single day, you’ll have them all handled before you know it.

So, let me know in the comments, what’s one thing you can do today to make progress on one of these items? How are you going to take a step forward?

Start building a better financial future with the resource I wish I had when I was starting my family. It’s free!

20 Comments... Read them below or add one of your own
  • Brian @ Luke1428 June 9, 2014

    Boy…everyone it seems forgets #3. I just heard a statistic the other day that over 70% of people in he U.S. die without a will. That really seemed high but I can see it being true. Everyone over 18 with any type of assets should have one, especially a family with kids. To not have one at that point is not only negligent, but irresponsible.

    • Matt Becker June 9, 2014

      Over 70%? Wow, that’s pretty crazy. I can definitely understand why people drag their feet about getting their wills done, but I’m with you. It’s just too important to ignore.

  • Joe Saul-Sehy June 9, 2014

    Great list. I hope people read this BEFORE they decide to have a child. Some may look at this and say, “Wow, that’s a lot more insurance.” I’d say, “Exactly.” Having a child doesn’t just mean another mouth to feed. It means more to protect. Nice job, Matt.

  • Holly@ClubThrifty June 9, 2014

    I agree wholeheartedly with this list! Parenthood is hard enough without worrying about money and making ends meet all the time. It’s also important to have life insurance when you have kids. If you’re not around to provide for them, having life insurance is the least you can do.

    • Matt Becker June 9, 2014

      I’m a huge fan of life insurance! It can be pretty cheap too when it’s done right. And it’s almost impossible to save up the money your kids would need on your own, at least in those first few years, so life insurance is really a huge protection.

  • Syed June 9, 2014

    Very informative and comprehensive post. With a 1 year old boy myself, I can’t emphasize enough the importance of having a cash cushion. There will be the inevitable doctor/ER run because or accidents or parents being paranoid. And those can get expensive. Having some cash in the bank definitely helps.

    • Matt Becker June 9, 2014

      I totally agree. There’s just so much happening especially in those first few months, and you’re not going to want to have to worry about spending a little more than usual. Having some extra savings will take away a lot of the stress.

  • Michelle June 9, 2014

    I need to pass this along to my sister. I know she does not have some of these. Thanks for posting this!

  • Debs June 9, 2014

    My daughter just had my first grandchild 7 months ago and I’ve been asking them if they have a will. Don’t want to stress them out as they have enough on their plate as they recently moved but they need to look into this before her maternity leave ends.

    • Matt Becker June 9, 2014

      It’s not a fun thing to deal with, but it’s so important. And it’s a hard spot for you to be in too, wanting to help without wanting to be pushy. The good news is that whenever they do decide to get it done, it’s a relatively simple process. Hopefully it’s nice and quick!

  • Done by Forty June 10, 2014

    I know I need to get a will…but I seriously don’t want to. I avoid that crap like it’s a dang prostate exam.

    • Matt Becker June 10, 2014

      Haha! Besides the typical reasons, is there anything in particular that’s holding you back?

      • Done by Forty June 10, 2014

        I figure until we have children it’s a bit of a nit. Something that would be good to do, but not too urgent. Heck, if both my wife and I die simultaneously, the world can go ahead and figure out what to do with our assets.

        • Matt Becker June 11, 2014

          I can understand that. It’s definitely less urgent when there aren’t kids in the picture. Especially in Arizona, where it looks like the spouse inherits everything when there is no will. As long as you guys are cool with that, there may not be a huge need to do it.

  • Laurie @thefrugalfarmer June 11, 2014

    And don’t forget “Pay off debt ASAP”! If we’d have done that when our first was born, it would be a different picture for us now.

    • Matt Becker June 11, 2014

      Good point! If you’ve got a lot of debt, prioritizing that can make a lot of sense. Honestly though, I would probably still put most of these things first in most cases. The protection almost becomes even more important when you have debt.

  • Shannon June 16, 2014

    This is such a great all-inclusive guide to preparing financially for parenthood! My husband and I aren’t there yet (nor will we be for a few more years), but I’ll definitely bookmark this for when we get closer to that time. So many things to think about!

    • Matt Becker June 17, 2014

      Thanks! It’s interesting because it definitely is a lot to think about if you’re doing it all at once, but the good news is that most of them are things that you can handle and then mostly forget. Sure, periodic reviews are important every now and then, but for the most part you don’t have to worry about them once you’ve got them handled.

Leave a Comment