I'm a Financial Planner and a Parent: Here Are Five Money Habits Every Young Family Should Have

Raising a family is one of life's most rewarding journeys, but it's also one of the most expensive.

As of 2023, raising a child from birth to the age of 18 could cost an average of $331,933, according to Northwestern Mutual.

Between child care, housing costs and saving for college tuition, it's easy to feel like you're constantly playing catch-up. As a financial planner and a parent, I know firsthand how overwhelming it can be to juggle it all.

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The good news is you don't need to make millions or have a crystal ball to create stability. A few smart financial habits can help make a world of difference. This article contains five important financial tips that every young family should know.

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1. Build a strong emergency fund

Life with kids is full of surprises — some sweet, others not so much. That late-night trip to urgent care, the school laptop that suddenly breaks or the daycare that raises fees without warning … these are the moments when an emergency fund can help keep you afloat.

Aim to save three to six months of essential expenses in a separate emergency account. Think of it as your family's financial airbag. You hope you never need it, but you'll be grateful it's there.

A high-yield savings account is ideal because it's accessible when life happens, yet tucked away from everyday spending needs.

2. Create (and stick to) a family budget

Budgets are just a map of where your money is going and whether it's taking you in the right direction. Begin by tracking your income and expenses, then categorize them into essentials (such as housing, food, child care and utilities) and non-essentials (like streaming subscriptions, eating out and luxury items).

When you see where your money is going, it's easier to cut back in some areas and redirect those dollars to bigger goals. A budget isn't about deprivation. It's about aligning spending with what truly matters to you and your family.

Apps like YNAB, Quicken Simplifi or Monarch make budgeting more user-friendly and less spreadsheet-intensive, although I'm a spreadsheet enthusiast myself.

3. Get the right insurance in place

Insurance may not be exciting, but it can be your family's safety net. Without it, a single event could possibly derail years of progress. At a minimum, young families should prioritize:

• Health insurance to shield against medical costs
• Life insurance to provide for loved ones if something happens to you or your partner
• Homeowners or renters' insurance to protect your home and belongings
• Auto insurance to protect against costly accidents or liability on the road
• Umbrella insurance to cover liabilities above and beyond what your home and auto insurance don't cover

Depending on your situation, there are different kinds of life insurance you can choose from. For young families on a budget, term life insurance is generally a more suitable option over whole life insurance. It's simpler, cheaper and gives you the coverage you need without locking you into an expensive product.

4. Start saving for education early

College may feel light-years away when you're still paying for diapers, but time is your biggest ally. A 529 college savings plan allows your money to grow tax-free when used for qualified education expenses.

Even small monthly contributions can compound into something meaningful by the time your child heads off to campus.

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I encourage grandparents and relatives to make gifts directly to a child's 529 plan during birthdays or holidays. The gift of education lasts longer than a toy your kids will eventually grow out of.

Thanks to the SECURE 2.0 Act, if your 529 account has been open for at least 15 years, up to $35,000 can be rolled over into a Roth IRA. Just one more reason to start early.

5. Invest in your retirement

When you're juggling child care and household expenses, it's tempting to postpone retirement savings. But here's the hard truth: You can borrow for college, but you can't borrow for retirement.

If your employer offers a 401(k), contribute at least enough to capture the full company match, as this essentially amounts to free money. From there, aim to save 15% to 20% of your gross income toward retirement.

If a 401(k) isn't available, look into an IRA or Roth IRA for tax-advantaged growth. Your future self and adult future children will thank you.

Wrapping it all together

There's no perfect playbook for family finances, but these five strategies create a strong foundation. Start with the basics: An emergency cushion, a thoughtful budget, the right protections, and consistent saving for both education and retirement.

And don't forget the bigger picture. Financial planning isn't only about building security. It's also about giving your family the freedom to enjoy the moments that matter most.

The kids are little only once, so while you're building good money habits, make sure you leave room for fun along the way.

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