Pure’s Senior Financial Advisor, Michael Chipperfield, CFP®, AIF®, provides six critical considerations for growing families who want to establish a stronger financial foundation.
Transcript
Here’s a jaw-dropping stat: it now costs over $300,000 on average to raise a child in the U.S. over 18 years.1
If you’re just becoming a parent or expecting, you’re entering one of life’s most rewarding chapters, but also one of the most financially demanding. So, today I want to walk you through six key financial-planning steps every new parent should consider.
1. Consider insurance: life and disability.
Now that there’s a little one depending on you, your financial safety net matters even more. Having adequate life insurance can help protect your growing family, covering things like a mortgage, tuition or unexpected needs. And disability insurance matters, too. What if you or your partner couldn’t work because of illness or injury? Make sure your employer-provided plan is sufficient, and consider supplementing if it’s not.
2. Increase your emergency fund.
With a child in the house, the stakes for a “rainy day” just got higher. It is recommended to keep at least three to six months’ worth of essential living expenses in a liquid, safe place. That means: mortgage or rent, utilities, childcare, household necessities. Children add complexity — think unplanned pediatric visits, sudden daycare changes, job transitions — so your cushion should be solid.
3. Take advantage of tax breaks.
Children bring enormous joy — and yes, tax complexity. You may qualify for the Child and Dependent Care Credit, which is up to $3,000 for one child or $6,000 for two or more, under certain income thresholds. Also, if your employer offers a Dependent Care Flexible Spending Account (FSA), you may be able to set aside up to $7,500 pre-tax for childcare-related costs in 2026.
4. Start saving for college now.
Here’s one that surprises many new parents: if you begin saving early, your compounding time can make a huge difference. Here’s an example: if you contribute $500/month from your child’s birth, assuming a 6% rate of return, you could have around $200,000 by the time they head to college. But, what if you wait until they’re in 4th grade? That same money might only grow to about $70,000. Now, saving for college isn’t the only goal — but it’s an important one. Consider a tax-advantaged account (like a 529) and make it part of your long-term plan.
5. Prioritize your retirement savings.
Here’s the hard truth: your child may have multiple ways to fund education, such as scholarships, loans, work-study, etc. But you don’t get a second chance at retirement savings. If push comes to shove, focus on your retirement first. Aim for saving at least 10-15% of your pre-tax income — or more if you started late. Remember: by protecting your retirement, you’re also protecting your child from becoming financially responsible for you later.
6. Update your estate-planning documents.
You might feel invincible, but planning for “just in case” is vital now that you’re a parent. Update your will to name a guardian, set up powers of attorney (financial & health care), and make sure beneficiary designations are current. Even if you’re young, this step brings peace of mind for you and your partner. Because it’s not just about you now; it’s about your child’s future.
So there you have it — six foundational financial steps for new parents. If you take even half of these seriously now, you’ll be setting up your family and your financial future for a smoother ride. If you have any questions, reach out to schedule a free financial assessment to review your situation before the year ends.
Source: Maggie Davis and Dan Shepard, It Costs an Additional $297,674 to Raise a Child Over 18 Years, Up 25.3%, Lending Tree, March 2025.
Subscribe to our YouTube channel.
IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.
• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
CFP® – The CERTIFIED FINANCIAL PLANNER® certification is by the CFP Board of Standards, Inc. To attain the right to use the CFP® mark, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. 30 hours of continuing education is required every 2 years to maintain the certification.
AIF® – Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation.
