You may be a rookie at this whole parenting thing, but you can be a bit smarter about your money with these easy fixes for common financial faux pas.
1. Overspending on gear
I have a confession: Our daughter Abby slept in a bassinet insert in a used Pack ’N Play in our room until she was ready for her hand-me-down crib. Low glam, to be sure, but cheap. A lot of parents drop big bucks outfitting the nursery with things they want, only to find out later how little they actually need, or how quickly their kid grows out of them. Choose a few items you really covet—my splurge was a new running stroller—then borrow the other basics, request them as gifts, or buy them cheap.
2. Ignoring the drop in income
Parents face many new expenses, but even worse is feeling surprised when your income takes a hit. Maternity and paternity leaves rarely top up your salary to 100 percent, and your partner will have less availability to work overtime, so you’ll almost inevitably feel the cash-flow pinch. If you ignore it, you risk racking up debt that is both expensive and stressful. Take a cold, hard look at the numbers and brainstorm where you can cut back. Hold off on big purchases and consider temporarily trimming on gifts, charitable donations, and maybe even retirement savings. And if you know you’re going to need to take on debt, set up a low-rate line of credit with a limit you won’t go over.
3. Waiting to buy life insurance
Your insurance needs change dramatically the minute your child arrives. Though chances are slim that they’ll need it, buying a life-insurance policy is one of the most important things you can do to protect your family financially.
4. Passing on the RESP
There are two huge incentives to starting your Registered Education Savings Plan immediately. First, the government gives a 20 percent match on up to $2,500 in contributions each year, and you’ll need every cent. Second, the sooner you start, the harder that magical compound interest will work for you. Make it easy: If your budget allows, set up an automatic monthly transfer into an RESP or use the Universal Child Care benefit you receive from the government every month.
5. Under-spending on date night
The payoff can be hard to see when you’re bone tired and still have three loads of laundry to do before bed, but date night is an investment in your good health—it really is worth the money for a sitter. Whether you’re partnered or a single parent taking time for yourself or with a friend, you really need to refuel and be reminded that there is a world outside your home. The best advice I received about date night? Lower your standards. Don’t fuss about the restaurant or your hair. Put on a clean shirt and just go out without your kid—and don’t feel guilty about it. Use three syllable words for a change, or watch a movie in complete and glorious silence. Make no mistake: Doing something for yourself is money well spent.
A version of this article appeared in the February 2015 issue with the headline “5 common money mistakes new parents make,” p. 40.