7 Money Mistakes I Made As A New Parent

There are many money mistakes I made over the years. And here is one.

I remember well how excited I was as a new parent. The moment of knowing you’re going to be a mom was priceless. I want to say that I’m a good planner and I always prepare. As soon as I knew we were expecting, I started planning my maternity leave, looking for a daycare, organizing & proofing our home, getting a nursery ready, enrolling in a child birthing & breastfeeding class and started filling up meals in our freezer.

Well, that sounds like I knew I was doing and was prepared, right?

Wrong…

We all know that we want everything for our kids. You have a new baby and you want to focus on being a good parent, not what you don’t have in your bank account. Okay, what was the problem here?  I overlooked many financial aspects of becoming a parent. We knew that our finances would change. However, we didn’t realize that the excitement of being a new parent affected us in so many ways.

Here are the 7 money mistakes I made as a new parent

1. I wasn’t prepared.

• Well, the pregnancy was a surprise 🙂 I became pregnant a few months after I started my new job. We also just moved to a new house (which was 900 miles away from the old one). Let me tell you, I didn’t want to be preggo and a new employee at the same time… That being said, I wasn’t well-prepared because the pregnancy was unplanned. At the same time, I always believe that the best time to become pregnant is when you’re already pregnant. I may sound cliche but it’s true. A baby is such a blessing!
• Since my pregnancy was unplanned, I didn’t pick the best health insurance options when I enrolled. If I knew, I would have chosen a better option.  I ended up paying a significant amount of money out of pocket in regards to childbirth delivery. Our baby came a little early as well and stayed in the NICU for 5 days after delivery  🙁
• If I could do it all over again, I would just pay a little extra to have better health insurance coverage regardless if I became pregnant or not. I should not have taken that chance. In my case, it was only $15 extra per bi-weekly paycheck (so it was only $390 more per year). Who would have thought that I’d have a new job, a new home in a new town, and a new baby all in one year! It can happen!
• Here’s my take. If you’re of childbearing age, it’s wise to have the best health insurance option you can afford. It’s because you never know when a life changing event is going to come…!

2. I bought unnecessary stuff my baby didn’t need.

• Oh yeah… our baby deserves everything in the whole wide world! Why not, right!?!
• I bought toys that my baby wasn’t able to play (yet). Whenever I saw a top ten baby gadgets list in a baby magazine, I made sure that I got them. Oh…well, I can go on and on with all the unnecessary stuff I bought for my baby in the first year.
• When it comes to nursery decorating, I gave it 110%. I’d gone crazy. My baby deserved the best and all of it. I filled up my nursery with toys, decor, stuffed animals, a new chair, new pillows, picture frames, you name it. My baby didn’t even need those stuff. They were just for my own feelings. I spent way too much.
• Babies don’t need that fancy stuff. Period.

3. I bought too much baby clothes.

• Everything was so darn cute! Baby clothing included. I didn’t realize how fast a baby grows. I know babies grow fast, but come on. Let me tell you, babies grow incredibly fast. Buying too much baby clothes is an easy money mistake new moms do.
• I bought all the first year clothes for my baby even before my baby was born. Big mistake! First of all, how on earth I would know for sure how big or how small my baby was going to be. I bought way too many onesies, tops, and pants. It didn’t take me long to realize that those pants I bought were already too small for my baby. I had many outfits that still have price tags on them.
• My baby didn’t need the cute outfits, cute pants/shorts or cute t-shirts, or that super duper cute jacket.
• It’s easy to fall into this trap. We tend to overspend when it comes to our kids. Spend your money wisely. Think twice before you buy. Are they going to (still) fit your baby? Would your baby wear them several times/regularly? How many times your baby will wear them?  Is it worth the money?

4. I bought too many diapers.

• Hey, diapers were on sale. Why not stock up? It sounds like a right approach to do so since a baby does go through a ton of diapers each day. It’s only okay if your baby will use it up before she or he outgrows them.
• I made this money mistake by stocking up on way too many diapers because they were on sale (like half price). Please don’t judge me (LOL).
• In the end, we ended up having 4 boxes of unopened newborn diapers (my baby outgrew them) and over 10 boxes of crawler diapers (my baby wasn’t able to use because of allergic reactions). That was a lot of money wasted 🙁
• My advice, buy as you go and go with the flow. If any diapers are on sale, buy some but don’t get caught off guard with the sale advertisements. You are not going to miss out on anything!

5. I didn’t take advantage of a health/childcare flexible spending account.

• Most employers offer a flexible spending account that allows you to set aside your pretax salary/wage to use for medical & childcare related expenses.  At the time, my employer allowed up to $5,500 a year for a flexible spending account. I didn’t take advantage of it :(. HUGE money mistake!
• Since it’s pre-tax money, it reduces your taxable income. Hence, it’ll reduce the amount of tax money you need to pay because of the reduced gross income. This simple move could have saved us hundreds on taxes.
• If you plan to utilize a childcare/daycare service, I urge you to look into it and set aside the money up to the max. Since you’re going to spend money on it anyway, why spend after-tax money for it.
• As soon as you know that you’re expecting, ask your HR department if they offer a flexible spending account. If they do, set aside as much as you can. It can save you hundreds maybe thousands on taxes.

6. I didn’t open a college saving account for my baby right from the start.

• Money was tight. There were other priorities we needed to spend money on. Babies need diapers, a stroller, car seats, wipes, clothing, the list goes on and on. Am I right? But please don’t get caught up in the pattern. Be smart with money and start saving money for college right away.
• College seems so far in the future when you’re just trying to make it through a day with your newborn. Between burping and changing, you barely have time to even sleep let alone open up a college saving plan. Remember a day is long but a year is short. In 17 years, your baby will leave and go to college. The student loan crisis has become a real problem in the U.S. and I’m sure, you don’t want to see your child with a funding limitation when it comes to education or career choices in the future.
• I opened a college saving account a year and a half after my baby was born and I regretted it. Please do not delay. Even a small amount will go a long way. The power of compounding interest is the eighth wonder of the world. The earlier you start saving the better regardless of how small the amount of your contribution. Many college saving plans only require a minimum of $25 to open and contribute. Do some research and find out what plans are best for you and your family.
• Most states offer a tax-advantaged 529 plan. You don’t need to open your account in your home state. However, you should look at your home state first because some states offer a tax break on the contribution.
• Here is my tip on setting money aside for college. It’s for college so please specifically open a college savings account, like a 529 plan. My in-laws opened a UTMA account which was intended for college for our baby without my knowledge. And it was a rookie money mistake! You’ll see why. With UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act), the account holder will be your child (under your child’s name, unlike a 529 plan which will be your name). The account’s earnings are taxable and balance cannot be withdrawn until the age of 21. And this is the most crucial part of all, the balance will count against your child financial aid eligibility. Instead, put the money in a 529 plan. It grows tax-free as long as you use it toward eligible college expenses. Some states also offer a tax deduction. The expense ratio and fee of a state-sponsored 529 plan are much lower than that of a financial institution charges for UTMA or UGMA. In addition, with the new tax law, a 529 plan can be used for enrollment at an elementary or secondary public, private, or religious school.  Nonetheless, if you or grandparents are considering UTMA or UGMA accounts, please evaluate your options wisely.

7. I (we) didn’t have an emergency fund.

• There were too many excuses I can think of for not having an emergency fund. One of them was because I had money set aside during my maternity leave which was more than enough for mortgages and household expenses (I was fortunate to be on mat leave for a full 5 months). It was a good chunk of money, I must say.  It sounded like I was financially prepared. No! I was not! My baby got sick (surgery and hospitalizations). That car seat didn’t work out so we needed to get a new one. A fridge decided to stop working. A sewage pipe broke. A tree fell on our driveway. The list went on and on. My oh my, how could so many unexpected things happened in just a span of 5 months.
• This was a huge money mistake. I didn’t account for unexpected events. Living without a safety net is a BAD idea. We racked up credit card debt in a very short time. Dang…
• Even though I had money tucked away to pay bills and cover our living expenses, I overlooked the importance of having an emergency fund for rainy days. It took me years to pay off that credit card debt. Lesson learned.
• Here is my piece of advice. Make an emergency fund your top financial goal. Set an automatic transfer to your saving account and forget it. Even you can do a small amount each month – do it. You know it’ll rain.

Are you expecting?

What are your tips for preparing for a new bundle of joy?