5 Good Financial Habits for Starting a Family

Starting a family is an exciting, transformative journey that brings many new responsibilities alongside joy. Whether you are anticipating the arrival of your first child or expanding your family, prioritizing financial wellness is key to building a strong, resilient future.

Establishing good financial habits when you are ready to start a family is a lesson that your kids will learn through observation and one of the most important gifts you can give them. Part of a family plan includes learning how to make a household budget to save money for your kids’ college. You can create peace of mind by taking control of your finances and planning for any eventuality.

Here are five wise financial tips to prioritize your family’s well-being and future.

1. Create a Budget

It is essential to create a new budget before starting a family. Doing so increases your financial stability and prepares you for the new expenses of raising children. Before making your official household budget, gather the following information:

• Assess your current finances. Review your debt obligations, expenses, and income. Understanding your financial situation gives you insight into your monthly cash flow and where you may need to adjust for commitments or financial goals. Calculate your monthly take-home pay and your total monthly expenses, such as food, housing, and utility bills.
• Estimate your new expenses. Anticipate the extra costs necessary for starting a family. These will include health care, child care, baby essentials, and an increase in utility and grocery costs. Newborn babies bring many new expenses — such as cribs, strollers, car seats, bottles, and clothing — that can throw off your current plan. Revisit this budget as your child grows, as these needs will change over time.
• Adjust your spending habits. After reviewing your current spending habits, pinpoint areas where you can cut costs. Nonessential items like subscriptions or dining out are a good place to reallocate funds toward your new expenses.
• Plan for parental leave. Plan for the likelihood that one or both parents will take time off work when your new family member arrives. Factor in the potential loss of income during this time.
• Remember your long-term financial goals. Account for saving for retirement and your kids’ education. Allocate funds towards these goals as part of your overall budget.

Mid Penn Tip: Use this information with the help of a budgeting tool or a spreadsheet to outline your monthly income and new expenses. The 50/30/20 budget is a good place to start, as it helps you divide your fixed and variable expenses in a simple fashion. It recommends devoting 50% of your budget to essentials, 30% to wants, and 20% to savings.

2. Build an Emergency Fund

Build or replenish your emergency fund in an ongoing effort to cover any unexpected expenses. Set the goal of having three to nine months’ worth of living expenses at all times in an easy-to-access account. The key is to stay consistent with your contributions and use this money when you have health care expenses, an unexpected tax bill, loss of income, or car troubles.

Mid Penn Tip: If you cannot contribute a significant amount to this fund initially, start small and gradually increase that amount over time. Prioritizing your trajectory instead of specific amounts can help you reach your savings goal. You can put unexpected windfalls like tax refunds, cash gifts, or bonuses toward your emergency fund.

3. Invest in Insurance

An estimated 25.9 million Americans had no health insurance in 2022, putting families at risk in the event of health complications. Investing in family insurance coverage as part of your exploration into budgeting for the family will safeguard their future. It provides financial protection and peace of mind for your loved ones in unexpected circumstances like health complications.

There are various insurance policies to consider:

• Health insurance: If you don’t have medical coverage through your employer, consider the health care marketplace, Pennie, or the Children’s Health Insurance Program (CHIP). Both options provide low-cost health care options for you and your child.
• Auto insurance: Most states require car insurance. If you’re at fault in an automotive accident, your liability coverage will help pay for covered losses, such as the other individual’s medical bills or damage to their vehicle.
• Life insurance: Life insurance offers your family a financial safety net if the primary breadwinner suddenly passes away.
• Disability insurance: Disability insurance gives you income protection if illness or injury prevents you from working.
• Property insurance: Homeowners and renters insurance protects your belongings. It provides liability coverage in case of theft, property damage, or personal injury.
• Estate planning and long-term care insurance: As your family grows, consider estate planning strategies like wills, trusts, and power of attorney to protect your assets.

Mid Penn Tip: Reach out to Mid Penn Bank Insurance and Risk Management for assistance in finding the right insurance package for your family’s needs.

4. Save for the Future

Saving for future expenses will help you alleviate financial stress. Start by setting clear, achievable goals to help you stay focused and motivate you to continue saving. These savings can include holidays and other indulgences but should also be geared toward these big-ticket expenses:

• Parental leave: Understand the financial implications of parental leave. Review your employer’s personal leave policies for available benefits.
• Child care expenses: Research the cost of child care in your area and start saving early.
• Additional income: Explore other income sources to supplement your savings. This can include using accrued vacation time or taking on freelance work.
• Retirement savings: Start saving for your retirement early and let compounding interest help you grow your savings. You can look at investment vehicles like employer-sponsored 401(k) plans or individual retirement accounts (IRAs) to start.

Mid Penn Tip: Use automatic transfers from your paycheck or checking account to your savings account.

5. Start Saving for Your Child’s Education as Soon as Possible

College tuition and expenses are on the rise, with the average annual tuition reaching $30,500 for a private two-year institution. Saving early allows you to take advantage of compounding interest, maximizing your child’s available funds. It will give your child the flexibility to choose the right college when they plan to further their education. Consider a 529 plan, which offers investment growth potential for educational expenses and tax advantages.

Mid Penn Tip: Consider Mid Penn Bank’s My Savings Account just for kids. It comes with no monthly service fees or minimum balance requirements. It also includes a birthday card with a $5 match when you deposit $25 or more within 30 days of your child’s birthday.

Mid Penn Bank Can Help You Start a College Fund for Your Kids

It’s essential to review and adjust your budget regularly as your family’s needs and circumstances change. Flexibility is key to staying on track with your financial goals. Automatic transfers can help by taking away the additional admin that comes with your new family budget.

At Mid Penn Bank, we can help you plan for growing your family’s future. We have been a community staple for over 150 years, offering checking and savings accounts, insurance, mortgages, and other services to help you manage your day-to-day finances. Contact us today or find a branch near you for in-person assistance.

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