From Baby Steps to a Bright Future
Welcoming a new baby is one of life’s most joyful milestones. It’s a time of excitement, wonder, and planning for a brand-new future. As you prepare for this incredible journey, it’s also the perfect time to build a financial foundation that will support your growing family for years to come.
For new and expecting parents, questions about money can feel overwhelming. What are the new expenses? How much should we be saving? At Points West, we believe that with a little guidance, financial planning for parents in Colorado can be an empowering and positive experience.
This guide will walk you through the real cost of raising a child in Colorado and provide a clear, actionable checklist to help you prepare your finances with confidence.
How Much Does It Cost to Raise a Child in Colorado?
Understanding the costs involved is the first step in creating a solid plan. While the exact number varies by family, recent data gives us a clear picture. According to a 2024 analysis by SmartAsset, the estimated cost of raising a child from birth to age 18 in Colorado is over $300,000, ranking it among the most expensive states in the nation.
A significant portion of this cost is childcare. According to Tootris News and Education Center, the average annual cost of infant care in Colorado is over $19,000, which is higher than in-state college tuition. Seeing these numbers isn’t meant to cause alarm; it’s meant to prepare you. By understanding the financial landscape, you can create a proactive plan to manage these costs effectively.
Your Financial Checklist for Parents: 7 Steps to a Strong Start
This checklist for raising a family is designed to break down the process into simple, manageable steps.
1. Reimagine Your Family Budget
Your pre-baby budget needs an update. The first step is to get a clear picture of your current spending habits before the baby arrives. The key is to find a tracking method that you’ll actually stick with. There are several great options to choose from:
- Your bank’s digital tools: Often, the easiest and most secure place to start is with the tools you already have. The Points West online and mobile banking platform includes features that can help you categorize your spending, giving you a clear and simple overview of where your money is going.
- A simple spreadsheet: For those who like a hands-on approach, a spreadsheet using Google Sheets or Microsoft Excel can be perfect. You can find hundreds of free, pre-made family budget templates online to get you started.
- Dedicated budgeting apps: While we don’t endorse specific third-party apps, many families find success with tools like YNAB (You Need A Budget) for detailed, proactive planning or Goodbudget for a digital take on the classic “envelope system.”
- A pen and a notebook: Don’t underestimate the power of simplicity! A dedicated notebook can be just as effective for tracking your daily spending and creating a budget.
Once you have a handle on your current finances, you can create new categories for all the baby-related costs you can anticipate. Start by listing out the two types of baby expenses you’ll encounter immediately:
- One-time purchases: These are the big-ticket items you’ll need to prepare for, like a crib, car seat, stroller, and other nursery essentials.
- New recurring costs: These will become a regular part of your monthly budget and include everything from diapers and formula to clothing and baby supplies.
2. Open a Dedicated “Baby Fund” Savings Account
One of the best ways to prepare for both planned and unexpected baby expenses is to start a dedicated savings fund. By setting up an automatic transfer from your checking account to a separate savings account each payday, you build your fund consistently without having to think about it. This account can be your go-to for covering everything from doctor’s visit co-pays to saving for that first birthday party. It’s a simple strategy that provides immense peace of mind.
3. Review and Update Your Insurance Coverage
This is a critical step that is often overlooked in the excitement of preparing for a new baby.
- Health insurance: Contact your provider to understand the costs of childbirth and the process for adding your newborn to your policy. There is typically a limited window (often 30 days) to do this after the baby is born.
- Life insurance: If you don’t have life insurance, now is the time to get it. A term life insurance policy is an affordable way to ensure your child and partner would be financially protected if something were to happen to you.
4. Create a Childcare Plan (and Budget)
As the statistics show, childcare is the largest new expense for most working families in Colorado. It’s essential to start your research early. Explore your options, from in-home care to daycare centers, and get on waiting lists, if necessary, as spots can fill up quickly.
Once you have an idea of the monthly cost, you can build it directly into the budget you started in Step 1. The financial tools on the Points West website are ideal for incorporating this new line item, enabling you to assess its impact on your overall cash flow and plan accordingly.
5. Plant the Seeds for Their Future: College Savings
College may seem like a lifetime away, but the power of compound interest means that starting now—even with small contributions—can make a monumental difference. Look into opening a 529 Plan, a tax-advantaged savings plan designed specifically for education expenses, where you can often start with a small initial deposit and set up recurring contributions.
While a 529 plan is an excellent tool, creating a long-term education savings strategy can feel complex. This is where professional guidance is invaluable. The LPL Financial Advisors available through Points West Community Bank can help you navigate your options, choose the right plan for your family, and integrate college savings into your overall financial goals.
6. Protect Your Family: Update Legal Documents
This is your most important act of financial protection. Work with an attorney to create or update your will and, most importantly, to legally name a guardian for your child. This ensures that in a worst-case scenario, the person you trust most will be designated to care for your child. You should also review and update the beneficiaries on all of your financial accounts, including your 401(k) and life insurance policies.
7. Maximize Your Tax Benefits
Having a child comes with several valuable tax benefits that can significantly improve your family’s financial picture. These aren’t just small deductions; they are powerful credits that can put thousands of dollars back into your budget each year, freeing up funds for other important goals like your emergency fund or college savings.
It’s important to understand that a tax credit is particularly powerful because it reduces your tax bill on a dollar-for-dollar basis. The two most significant credits for new parents are:
- The Child Tax Credit: This credit directly reduces the amount of income tax you owe for each qualifying child. This can result in a much smaller tax bill at the end of the year or a significantly larger tax refund—a perfect annual boost for kick-starting your child’s 529 plan.
- The Child and Dependent Care Credit: This credit helps you recoup a percentage of the money you spend on childcare (like daycare or a babysitter) so you can work or look for work. Given the high cost of raising a child in Colorado, this is a vital benefit that can offset a major household expense.
Tax laws can be complex and are subject to change. To ensure you are maximizing every credit and deduction you are entitled to, it is always best to consult with a qualified tax professional.
Your Partner on the Journey
The journey into parenthood is filled with new responsibilities, and taking charge of your finances is one of the most empowering steps you can take to ensure a secure future for your family. At Points West Community Bank, we are here to be your partner every step of the way. Find your nearest PWCB branch in Colorado.
Ready to start planning? Contact us for more tips on savings or for more information about our personal banking products. And for more financial guidance for every stage of life, be sure to check out our blog!