Responsible parenthood starts with getting financially organized

Start by reviewing your current budget. Consider what you can adjust to accommodate new expenses, like childcare, formula, diapers, and clothing and plan for any lost income from parental leave. Revisit your spending habits and look for ways to better budget your household income and how it might change as new parents.

Add your child to the benefits you already receive from your employer

Look into your current employer-sponsored benefits package. When your child is born, you should be able to change your benefits enrollment status and add your child to any plans you’re offered, such as medical, dental, vision, and life insurance.  Be very clear on how your health insurance policy works and watch for different deductibles and out-of-pocket maximums that will vary if you change from an individual plan to a family plan.

Use your Flexible Spending Account or Health Savings Account

If your company offers a Flexible Spending Account (FSA) or a Health Savings Account (HSA), you may consider putting a bigger allowance in it prior to the birth of your child. Most FSAs and HSAs will cover deductibles and co-pays, as well as new medical expenses that can come with babies. Adding to an FSA or HSA lowers your taxable income but you should note that unspent FSA money is normally lost, so check your firm’s requirements and estimate your needs in advance. HSA plans allow funds to rollover, so be sure you plan accordingly.

Consider accident or critical illness insurance

Find out if your company offers accident insurance to ensure that you’ll have financial protection even in the case of an injury, which is even more important as you become a new parent. Your company might also offer critical illness insurance, which can help cover expenses if you or a dependent are diagnosed with a critical illness. This protection may include childhood conditions such as Down syndrome and cystic fibrosis. You’ll need to have this insurance in place in advance of your child’s birth to ensure coverage.

Protect your assets and income through life insurance or disability income insurance

You may want to reevaluate your life insurance coverage or acquire a life insurance policy to have financial confidence that your child will be protected no matter what happens to you. You can choose from term life insurance, which will last for a specific number or years, or a whole life insurance policy, which is intended to last your lifetime as long as your payments are current and helps you to build a long-term cash-value asset.2,3

Disability income insurance can help to replace a portion of your paycheck if you become too sick or injured to work. This can help protect your income as you support your growing family.

Plan for college savings

Saving for college should be treated separately from other long-term savings goals, such as retirement. 529 plans, for example, are vehicles specifically designed to save money for college.4 If you save money in a 529 plan early on, both the balance and interest will compound and grow. You could also use a permanent life insurance policy — which has tax advantages and spending flexibility — to build college savings.5,6 Getting started is the most important thing for new parents, so save what you can now and you can always increase the amount as your income grows.

Other considerations

Whether it’s before or after your child is born, it's important to set up a financial strategy that will enable your family to grow and prosper. You should also consider creating a will specifying what will happen to your resources in the future. Speak with a financial professional, who can help make recommendations about how to best protect your new family and arrange your finances so that you can further the opportunities for both yourself and your celebrated new arrival.

Welcoming a new child to your family can be both exciting and overwhelming for parents. The steps you take today can help you to prepare for responsible parenthood.

Need some help?

Find a financial professional near you who can help


Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

Photo by Kelly Sikkema on Unsplash.

1 U.S Department of Agriculture, The Cost of Raising a Child, March 8, 2017

2 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.

3 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

4 Investors should consider the investment objectives, risks, charges and expenses of a 529 plan carefully before investing. This and other information are contained in the Program Description, which may be obtained from your investment professional. Please read it before you invest. A 529 plan is a tax-advantaged savings plan issued and operated by the state or educational institution that helps facilitate savings for college.

A 529 plan is a tax-advantaged savings plan, issued and operated by a state or educational institution that helps families save for college. Investments in 529 plans are not insured by the FDIC or any other government agency and are not deposits or other obligations of any depository institution. Investments are not guaranteed and are subject to investment risks, including loss of the principal amount invested. Tax implications vary significantly from state to state. If you or the designated beneficiary is not a resident of the state offering a 529 plan, you may want to consider, before investing, whether your state or the designated beneficiary's home state offers its residents a plan with state tax advantages or other benefits. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

5 Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

2022-138997 20240630