New mom napping with baby
@crystalmariesing/Twenty20

First comes love, then comes marriage, then comes a baby and a whole lot of worry over how to make sure your precious new addition has every advantage.

“We were financially responsible before having our daughter, but since she arrived, we’ve put even more focus on making sure we’re ready to provide for her future,” says first-time mom Stephany Darden. “There was nothing that could’ve prepared me how much I want to protect her. It’s an indescribable feeling.”

The care of that pint-sized person can cost a bundle: The survey results released by the United States Department of Agriculture in 2015 found that, on average, American parents spend $233,610 per child from birth until age 17, not including college.

It doesn’t have to be overwhelming, says Matt Luckey, an investment adviser for Transamerica Financial Advisors. “We encourage our clients to do some financial nesting, in addition to all the traditional nesting activities.”

Here are five categories to get you started.

1. Ditch the debt

It probably goes without saying, but if you’re in debt, do everything you can to pay it down before your baby arrives. Monthly payments for student loans, high-interest credit cards and personal loans can squeeze a household budget, especially when you’ve got a whole new category of expenses like baby gear, formula and diapers.

2. Beef up your emergency fund

Unexpected costs pop up in regular life, but outlays that were once merely inconvenient can feel even more urgent when your baby’s involved. For car trouble to medical expenses, having an emergency fund set aside will give you peace of mind.

“Kids make life more unpredictable, so it’s imperative that you have at least three to six months of living expenses saved in an emergency fund,” Luckey says, adding that sticking to a budget can help you save over time. Be sure to protect that fund and only use it for true emergencies such as a medical crisis or paying expenses in the event of a job loss.

For Darden and her husband, they wanted to save even more before their daughter arrived. “We increased our emergency fund to one year’s worth of living expenses,” she says. “We felt it was necessary just in case something were to happen to either of our jobs.”

3. Retirement planning

It may seem odd to focus on retirement planning when you’re planning for your baby, but it’s vital. “We’ve put a bigger priority on our retirement, so my daughter won’t have the responsibility of taking care of us,” Darden explains.

Luckey agrees it’s a smart strategy. “Studies show that having children increases your risk of getting off track with retirement savings. The good news is that since the average age of having your first child is the late 20s, you still have 35 to 40 years before reaching retirement age,” says the Atlanta-based financial adviser. “It’s the ideal time to start an investment program where you can try to grow your money with compound interest.”

4. Life insurance and estate planning

Any loss is heart-breaking, but the death of a parent can be devastating, particularly to a household with young children. Make sure you draft estate-planning documents including a will, power of attorney, medical directives and health care proxies for both parents. It’s also important to name a guardian or guardians for your minor child. Choose a trusted attorney to guide you through the process or use templates, such as those available online at LegalZoom.

It’s also important to have adequate life insurance to replace the income and contributions of both parents. “One of the pitfalls we see with couples having their first child, especially if one of the parents decides to stay at home, is that they only focus on having insurance on the breadwinning spouse,” Luckey notes. “It’s vital to have sufficient insurance on the stay at home spouse because the surviving spouse would have a considerable amount of expenses for replacing the childcare and other significant contributions of the stay at home spouse.”

5. College fund

It might be hard to imagine your tiny baby as a college student, but those days come faster than you think. And, America’s debt for higher education is out of control: According to Federal Reserve data, as of the first quarter of 2018, Americans owe $1.5 trillion in student loans. Help your child avoid contributing—and having to pay back a portion—of such debt, by planning ahead with college savings funds. Plus, if you start when your child is young (and invite generous relatives to contribute as well), compound interest can work to your child’s advantage in the years between birth and college.

There are a number of attractive college fund options, but one of the most popular are 529 plans, which are tax-advantaged tuition savings plans. “The December 2017 tax reform bill made 529 plans more attractive, because now, not only are they available for college use, but they can also help pay for primary education, such as elementary school if a family intends to send their kid to a private school,” Luckey explains.

Other viable options include Education Savings Accounts (ESA), which grow tax-free. Regardless, it’s smart to sit down with a trusted financial professional to examine the benefits of each plan and choose the one that best suits your needs and area, since some plans have state-specific tax benefits.