5 Steps to Start Investing as a New Mom

New moms typically are maxed out from a time standpoint, but you can start investing for you and your baby with just a few minutes here and there.

A mother waves a toy in front of her baby while working on the computer.
(Image credit: Getty Images)

Moms are master multitaskers. They're also masters at putting everyone else's needs before their own. There are only so many hours in the day, and certain things – like making sure your family is fed and wearing clean underwear – tend to take priority over less pressing needs, such as learning how to start investing for your future.

But that latter task is (almost) as important as meals and clean underwear, and it can be done in less time than either.

As maxed out as you likely are from a time standpoint, "finding that little bit of time to dedicate to your finances in the midst of a hectic life as a new mom will pay dividends down the road," says Zuzana Brochu, Vice President of Financial Planning Strategy at People's United Advisors. She suggests making an appointment with yourself on the calendar for when you'll address your finances.

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It needn't be more than 15 minutes. Kiana Danial, CEO of Invest Diva, went from spending hours every day to 15 minutes once a month monitoring the markets; her account balance was all the better for it.

And 15 minutes is all you'll need to both read this article and get going on these five steps for new moms who want to start investing.

Before You Begin: Prepare Your Financial Foundation

Before you start investing, you must ensure you have a solid financial foundation to build your future wealth on. First and foremost, that means building an emergency fund to protect yourself, your investments and your child.

"Once you have a child, it is not just about you anymore – you are responsible for another human being," says Ksenia Yudina, founder and CEO of UNest, a UTMA (Uniform Transfers to Minors Act) investment app. "That means being financially prepared for a 'black swan' event such as an unexpected medical bill, job loss or even a pandemic."

She says to aim for three to six months' worth of expenses set aside.

"If you have high-interest credit cards or other debt, pay that down first and stick to building a $1,000 emergency fund," she says. Once that's paid off, you can work up to the three to six months' expenses mark.

Step 1: Determine Your Investment Goals

The reason why you're investing will provide the guide rails for all of the investment decisions you make going forward. Your goals dictate the type of account you use, how much you invest and what you invest in. So when you're ready to start investing, you'll want to break your goals down into measurable and achievable objectives.

"I want to make a boat load of money" is not a measurable goal. How much is a "boat load"? When do you need that "boat load" by?

Goals need to be specific, Danial says, such as "I want to have $50,000 in my retirement account in three years." Once you reach that goal, she says you can step up your goals, perhaps to saving $100,000, then $200,000, then $1 million. Danial used this step-ladder system to grow her investments from $50,000 to being within realistic reach of her current goal of $10 million by 12 p.m. on Dec. 31, 2021.

So, start your investing plan by writing down exactly why you are investing and what your short-, medium- and long-term goals are. Try to give each goal as concrete of a dollar and time goal as you can.

Step 2: Create an Account With a Broker

To start investing, you'll need to create an investment account, which you can do with an internet connection and five minutes of time.

Danial says to ensure you choose a credible broker who is registered with the SEC and has SIPC insurance that would help cover you if the firm goes bankrupt. You can start your search with our annual list of the best online brokers.

You'll also want to think about the type of account you should open, which will depend on the reason you're investing. If it's retirement, an individual retirement account (IRA) is a good option. If you're saving for your child's education, look into a 529 savings account. Or Yudina suggests a UTMA account, which is a tax-advantaged custodial account that gives you the flexibility to pay for things outside of just education.

For any other savings, an individual non-retirement brokerage account will cover all your investing needs – just without the tax advantages of the previously mentioned accounts.

Step 3: Identify Your Risk Tolerance and Time Horizon

Your risk tolerance and time horizon (how long you have before you need the money you're investing) are the two main ingredients in determining the right blend of stocks, bonds and other investments, called your asset allocation, that you'll use in your investment account.

Danial says that not taking the time to determine risk tolerance is why the vast majority of traders lose money in the markets. Without a plan for their investments, they end up getting rattled and derailed by market noise.

The longer your time horizon and the higher your tolerance for risk, the more aggressive you can invest by holding a higher proportion of stocks to safer assets such as bonds or cash. Risk tolerance also will dictate which types of stocks you invest in, from larger, more established blue chips to smaller companies with limited histories but higher upside potential.

Note that risk tolerance is actually two components: your ability to take risk and your willingness to take risk. You might have the money and time to withstand the risk of a market decline, but if watching your accounts bounce up and down gives you ulcers, your willingness to take risk may require a more conservative approach.

Step 4: Pick Investments to Match Your Needs

Next up as you start investing is translating your risk tolerance, time horizon and financial goals into an investment portfolio. Risk tolerance is important because of its direct correlation to return, Danial says. Typically, the higher the expected return of an investment, the greater its risk.

In other words: For higher return, you need to take greater risks. But that doesn't mean you should be as aggressive as humanly possible.

If you have a low risk tolerance or a goal that is less than three years away, you'll want to stay away from riskier asset classes that could leave you overexposed to market volatility. Longer-term goals and high risk tolerances allow you to invest more aggressively for growth. But even here, balance is key – never take more risk than your goal requires or your finances and stomach can tolerate.

"If you're just dipping your toe into investing, I would recommend focusing on index funds or ETFs," Yudina says. "Not only are they low-cost, but they typically provide diversified exposure to a basket of stocks so that if one goes down, you can balance out the loss with the other stocks that are hopefully going up or more stable."

Step 5: Stay Engaged With Your Finances

Once you've created your investment portfolio, the hardest part is over. The beauty of investing in diversified funds is you don't have to watch them as closely as individual stocks, which can take a nosedive at a moment's bad news.

That said, once you've started investing, you shouldn't entirely set-and-forget your holdings. Check on your account at least once or twice a year to ensure it's still inline with your target allocation.

And remember: Investing is just one part of your financial life.

"As a financial advisor for 30 years who has worked with women at all stages of their life, my primary advice to mothers, and especially new mothers, is to stay actively engaged in family financial matters, and to recognize that a family's emotional and financial wellbeing are fundamentally connected," says Laura Pennington, managing director and private wealth advisor at Rockefeller Capital Management.

Competing priorities can easily get between you and participating in your family's finances.

"This can sometimes be problematic for women who, at some point, find themselves managing important financial issues on behalf of their family," Pennington says. "While not wholly avoidable, this problem can be mitigated by staying connected to family financials even while managing life's higher priorities related to children and family."

Coryanne Hicks
Contributing Writer, Kiplinger.com

Coryanne Hicks is an investing and personal finance journalist specializing in women and millennial investors. Previously, she was a fully licensed financial professional at Fidelity Investments where she helped clients make more informed financial decisions every day. She has ghostwritten financial guidebooks for industry professionals and even a personal memoir. She is passionate about improving financial literacy and believes a little education can go a long way. You can connect with her on Twitter, Instagram or her website, CoryanneHicks.com.