Congratulations on your new arrival!

Having a baby is a transforming experience. Making the transition to parenthood takes a lot of preparation. New parents wonder how they will support their family, how they'll be able to go back to work, and how they'll ever sleep again. One thing that may not be on your radar, but should be, is how you'll prepare financially for your new life.

Parenting is a tremendously rewarding experience but comes with a lot of responsibility. However, the joys of parenthood are more than double the amount of worries, especially if you take the time to plan. This is why getting your financial house in order and budgeting for your new family member before the big event is so important as can cost a fair amount of money, particularly if you're a first-time parent.

Here are some key financial planning tips for new parents:

1. Prepare a budget

If you are a new parent, you probably have many things to buy for your baby. One of the most important things you can do is create a budget for your family and household. It is even better if you can create a monthly budget for your baby. This will help you determine the right amount you need to save and plan and where you may need to cut back on to ensure you are able to meet your financial obligations.

Factor in all of the new expenses, such as diapers, formula, baby clothes, baby food, and other baby-related items. Be sure to save for future costs such as doctor appointments, vaccinations, and baby gear. Of course, if you are getting some gear as gifts from family and friends, these can then come off of your budget after the fact – in the meantime, keep it in your budget.

2. Increase your emergency fund

You will also want to make sure you have enough saved for emergencies. This is something everyone should do anyways. And if you have used up your emergency fund, refilling that fund should always be a priority.

As you welcome your baby, there will be trips to the doctor, both regular and unscheduled trips, along with vitamins, formulas, and other prescriptions. Try to increase your emergency fund, so you're prepared for surprises.

Many tend to use their salary for all their day-to-day expenses and save only a small fraction in their bank account. One of the biggest reasons for this is that they do not have an estimate of the expenses they will face after the birth of their baby. Having a child is a life-changing event, and it's important to be prepared for the added expenses. By creating a budget and saving for emergencies, you can ensure that you're ready for anything.

3. Focus on saving for new goals

As every parent will agree, every parent has a dream for their children. Whether it is to get a good education, get married, help the family become financially independent, start their own business, or help them run the business - there is a lot of financial planning that needs to be done. However, most parents seem to forget about financial planning or put it off thinking there’s a lot of time and it doesn’t require immediate attention. That is not correct. New parents should be saying that time is of the essence, we need to start planning ASAP!

While everyone wants to provide the best for their children, the sad truth is that it’s not a possibility for many. However, as you outline your personal and financial goals, and align your budget to these goals, just do the best you can. Create little buckets for each of your goals, and you want to put in something, no matter how much it is, in each of these buckets. The buckets could be retirement, child’s education, family vacation, so on and so forth. For some of these savings, you may want to consider investing in a mutual fund or opening a savings account specifically for your child to help you grow your savings over the long run.

4. Increase your insurance coverage

You may also need to purchase life insurance or update your existing insurance coverage to ensure that your family is taken care of if something happens to you. Your family will have to bear majority of the same expenses, even after your death so the insurance policy helps ensure a smooth transition and supports your family by safeguarding their financial futures.

5. Create a Will

Planning for the future is an important part of parenting. If something happens to you, it's important to have a Will in place that outlines who will take possession of your assets and will outline how this will benefit your family; and in the case you and your spouse both pass, the Will should also outline who will care for your child.

Having a Will in place before an accident or serious illness is important. It leaves the right instructions for how to care for your child. You may also want to include provisions for who will inherit your child's assets. The best advice is to get a Will in place while you are still healthy and well.

Financial planning for new parents can be overwhelming

It doesn't need to be. The key is to plan for it in advance and not rely on luck. Use the strategies and tips outlined to help you navigate the financial planning aspects of your new life as a parent. Speak to a financial planner and professional, their expertise can help guide you to create the financial future you want for your family and child.

Good luck and congratulations again!