Selects' editorial team reviews financial products independently and writes articles that we believe our readers will enjoy. Clicking on affiliate links may result in us receiving a commission.Parents expecting a child will undoubtedly have many things on their minds when they prepare to welcome another member of the family. One of these things is finances. It's clear that having a baby will mean a lot of money on diapers and other baby-related items, as well as the cost of outfitting a nursery. However, there are three major expenses you shouldn't wait until the last minute to budget for. Monica Sipes is a Texas-based CFP and senior wealth advisor at Exencial Wealth Advisors. She is also the mother of a 3-year-old.1. 1.Select is told by Sipes that this one often hits new parents hard. They walk out of the hospital carrying their newborn baby and expect to pay X. In reality, it is X-squared. Even with insurance, hospital births are costly. According to a peer-reviewed Health Affairs report published in January 2020, the average cost of labor and delivery in the U.S. is more than $4500. Sipes says that bills can come in for several months after the birth. Be prepared financially. Sipes recommends that you start to save $500 to $600 per month for hospital bills during pregnancy. This amount can vary depending on what your insurance policy covers. FAIR Health, a non-profit organization, offers a free tool to estimate the cost of childbirth in your state.2. 2.Sipes states that this is a major expense and the most expensive new cost parents will face. Sipes says that childcare costs can quickly add up for parents who work and need extra help. The cost of childcare can vary depending on how much care is required and the time commitment. Sipes recommends that parents-to be prepare for what they will do after childbirth. You can research the costs and options in your area for daycare, babysitters and nannies. You can shop around before you make any major decisions that could end up costing you even more. Sipes suggests that you might consider putting aside the expense for pregnancy or early in your life to ensure that you can afford it and have enough cash to cover it.High-yield savings accounts can help you save for childcare costs and birth costs. A high-yield account will grow your money more quickly than traditional savings accounts because it offers a higher APY. You still have the ability to access your funds when you need it to pay for hospital bills or to babysit. High-yield savings have lower minimum deposits and balance requirements than other interest-bearing accounts like money market accounts. This means that you don't have to invest a lot of money in order to start. The Ally Online Savings Account is a high-rated, high-yield savings option that allows you to easily organize all your savings goals and plan for a baby. Account holders have the option to create as many as 10 "buckets" in one savings account. You can, for example, create a fund for hospital delivery bills and another one for child care. Ally is a popular choice for consumers due to its simple-to-use mobile app, 24/7 live customer support that is available via chat or over the phone and the Ally mobile application. Read Select's review to learn more about the Ally Online Savings Account.3. Future educationOur methodologySelect reviewed dozens of 529 plans and narrowed down the list to 10 finalists. Plans that offered a range of investment options and were provided by reputable companies and investment management firms were considered. 529 plans were not evaluated based on their benefits (e.g., lower fees for residents of the state or prepaid college plans). When comparing the top 529 plans, we focused on the following: Management fees: We selected plans that have the lowest management fees. This is important because they can impact your annual balance. Investors can save thousands of dollars by paying a fraction of the fees.Our list has the lowest management fees. This is important because they can impact your annual balance. Investors can save thousands of dollars by paying a fraction of a percentage in fees. Investment returns: Past performance does not guarantee future results. But, looking at historical returns can indicate that the plan manager is doing a good job. We examined returns over a 5-year period.Past performance does not guarantee future results. However, historical returns patterns may be a sign that the plan manager has done a good job. We looked at returns for a period of five years. We chose the plans with the lowest maintenance fees for their fund underlying funds, aside from management fees. The expense ratio was a key deciding factor in our selection of 529 plans that offered more passive securities, such as index funds. Investors will also be affected by these costs.We chose plans that charged the lowest maintenance fees for underlying funds, in addition to management fees. The expense ratio was a key deciding factor in our selection of 529 plans that offered more passive securities, such as index funds. These costs can also impact the amount investors are able to save. There are many investment options. Parents and guardians have more options. We examined 529 plans that offer more options, such as age-based portfolios and individual funds. The minimum contribution amounts for each state's 529 plans may vary. Some states may not have minimum contributions but allow automatic contributions such as payroll deductions. Each state has its own cumulative contribution limit.Editor's Note: The opinions, analyses, reviews, or recommendations contained in this article are solely the responsibility of the Select editorial staff and have not been approved, endorsed, or otherwise reviewed by any third parties.
