To financially prepare for your growing family, you need to review and adjust your budget, add more to your emergency fund, look at your insurance policies, and save for your children’s future.

Growing your family is an exciting time and with this growth comes many new financial decisions and adjustments. Leaders Credit Union is here to walk you through what you need to know to ensure you have a strong strategic plan in place as you welcome new members into your family.

Key Takeaways

• The cost of raising one child from birth to 18 is $200K - $310K with housing being the highest expense.
• Use the 50/30/20 rule to budget as your family grows.
• Save up to 6 months of expenses in your emergency fund.
• Open a 529 Investment Account to save for your child’s education.

How Much Does It Cost to Raise a Family?

Raising a family is no easy feat. On top of caring for the emotional, mental, physical, and spiritual needs of your child, you need to care for them financially as well. In the United States, the estimated cost for raising a child from birth to age 18 can range from $200,000 to $310,000. Wow! It costs a lot of money to raise one child, and the cost increases for larger families.

Here is a breakdown of the average costs for your children:

Housing – 29%

Food – 18%

Childcare and Education – 16%

Transportation – 15%

Miscellaneous – 13%

Healthcare – 9%

So, how do you provide the necessities for your children (shelter, food, clothing) while also giving them a wide range of opportunities for their education, extracurricular activities, and even family vacations? The answer is to have an adequate financial plan to make sure you’re able to make these aspirations come true.

 

How Do You Budget For Your Children?

Now that you have a general idea of how much it will likely cost to raise your child, it’s time to review and adjust your budget. While there are many ways you can strategize how you’re going to allocate your money, one simple way is the 50/30/20 rule. Split up your budget into these three categories:

50% for needs

30% for wants

20% for savings

Breaking up your budget into these three categories is helpful not only for your overall budget, but specifically for your child. For example, let’s say you have a newborn baby. Their needs include things like diapers, a crib, potentially formula, and other newborn supplies like wipes. Wants for your newborn baby could include special décor in their nursery, while savings could be setting aside money for their future education.

 

How Much Should You Save Before Expanding Your Family?

As your family grows, so should your savings. Hopefully, you already have an established emergency fund, which should cover up to 3 months of expenses. This money should ultimately go untouched and ideally shouldn’t be in your checking account. One of the best ways to keep your emergency fund safe and growing is putting it into an interest-earning account like a high-yield savings account.

While you’ll want to aim for at least 3 months of expenses for a single parent or married couple, try aiming for 6 months of expenses when introducing a child. It's not fun to think about worst case scenarios, but it’s essential to consider the financial responsibility of being able to cover any unexpected medical bills or needs that may arise. You’ll appreciate the extra cushion and peace of mind an emergency fund will bring!

Pro Tip: Want a personalized suggestion for the estimated amount you should be aiming for with your emergency fund? Try this emergency fund calculator to find out.

Do You Need to Update Your Insurance Plans When Your Family Grows?

Insurance might not be at the forefront of your mind as you grow your family, but it is important to consider changes. Here’s some things about insurance to keep in mind:

• Look into life insurance. Life insurance can provide ease of mind in case a parent passes away. Sometimes your employer will include a life insurance policy with your benefits package, so see what they offer and how much compensation they provide. You can put your child as a beneficiary on your policy, so if anything happens, they will get coverage.
• Know the limits on your homeowner’s insurance. Be sure to communicate with your insurance provider about your new child and don’t be afraid to ask questions about your current coverage. This can help clarify if you need to make any changes to your plan.

Pro Tip: If you have any questions about life insurance or long-term financial decisions, reach out to Investment Services at Leaders Credit Union. 

When and How Should You Start Saving for Your Child's Education?

Whether your child is only a few months old or is just starting kindergarten, it’s never too early to begin saving for their future education. Education costs don't have to be only for tuition; it can cover extracurricular activities, textbooks, or even special learning opportunities like field trips or study abroad programs. The more you save now for their education, the more you can help cover necessities later, giving your child the chance to focus on learning and enjoying activities instead of worrying about costs or student loans.

One important distinction for how to save your money is separating what you’re saving for your child’s K-12 grade education from their postsecondary schooling like technical school training or college education.

Open a 529 Plan

One way to save for your child’s education is to utilize a 529 Plan. A 529 is an investment account that consists of mutual funds, portfolios, and exchange-traded funds (ETFs). You invest money into this account exclusively for your child’s education, so it can grow over years. The money has to be used for qualified expenses for specific educational purposes. Check with your state to see what expenses qualify.

It’s best to have two separate 529 plans: one for K-12 expenses and another for college. Using college funds early could mean early withdrawal fees. By having two separate plans, you can be sure you’re saving enough money while also making sure to keep them separate goals.

Saving for K-12 Education

529 Plans for K-12 students are for children who attend a public, private, or religious school. This investment account may not be as necessary if a child is at a public school, however, costs may arise that could be covered by a 529 Plan. Check into what expenses qualify in your state. It’s important to note that parents can only draw $10,000 from their account, even if there’s more money saved.

Saving for College

Ideally, parents should save 50% of the estimated price of what they think college (public or private) will be for their child. With college prices ranging from $34,000 to over $140,000, your savings goal can stack up quickly, especially if you have multiple children. 529 investment accounts for college can be a helpful asset for your children. The yearly limit for withdrawals is $10,000 and will be increasing to $20,000 in 2026.

FAQs about How to Financially Plan for Growing Family

Q: How much does it cost to raise a child?

A: According to the U.S. Department of Agriculture, the estimated total cost of raising one child from birth to 18 is $200,000 - $310,000.

Q: How should I budget for raising a child?

A: Use the 50/30/20 rule to help organize your budget, where 50% of your money goes towards needs, 30% towards wants, and 20% towards savings.

Q: How should I save for my child’s education? 

A: Opening a 529 investment account can help you save money for your child’s K-12 education or for college, where you can invest money and use $10,000 per year towards their tuition and other school expenses. 

Build Your Family's Finances with Leaders Credit Union

Whether you’re expecting a new baby or adopting a child, preparing for your child’s financial future is essential for their well-being. There’s a lot to think about, but you don’t have to make these decisions alone. Leaders Credit Union has a team of Certified Financial Counselors who would be happy to help you in your financial journey.

Want to learn more about navigating family finances for a newborn? Read our blog, “Family Finances: What to Consider When Becoming Parents.”

Deepen your understanding of how to manage your budget with our free smart budgeting toolkit.

Leaders is federally insured by the NCUA