8 Tips for Building Wealth as a New Parent
Congratulations on Your Wealth-Sucking Bundle of Joy!
Do you know how much money it costs to raise a child in America?
We’re talking about $284,594 on average, according to the Brookings Institute. That’s all in – from the day your baby is born until the day they turn 17 and you kick them out of the house with nothing but a handshake and a bindle (kidding… kidding…).
That means that, for many Americans, they’ll have to make some tough choices.
The average home costs about $350,000. Are you going to have a kid or buy a house?
The average retirement costs an estimated $1,120,408. Are you going to have a kid or retire wealthy?
Now, these aren’t purely mutually exclusive…
But if your goals are to build wealth, then the choice to have children can certainly set you back in a big way.
I know this first hand: I just had my second child on December 21, 2022.
The goal of DIYwealth has always been to help you make more, save more, and have a more fulfilled, wealthier life.
And while this article is going to be a bit different than our standard fare, I wanted to make some content that gives you little-known tips and tricks for saving money and building wealth during one of the hardest periods to do so — while becoming a new parent.
But here’s the thing…
Moms are responsible for about 66% of household purchasing decisions. That means that a lot of the potential opportunities to save money ultimately fall into the hands of mothers. (Dads, feel free to pass this article along to your wives. Your welcome.)
Despite the rumors floating around on Twitter, however… I am, in fact, not a mom.
So I invited my wife and business partner (a mom of three under five) to share what they have learned.
We got on camera and recorded a video, and we’ve also put together the article below to give you a few tips to help out if you’re thinking about entering this financially draining period of — errr — having kids or just had one!
Tip #1: There’s a “New Parent” Marketing Machine that Wants to Eat You Alive
Something physically happens to moms’ brain chemistry when they’re expecting a new child.
It’s called “nesting” — the instinct to prepare the baby’s future surroundings. (Turns out, this happens to dad’s too, but differently.)
It’s an extremely powerful instinct. And I’m not even going to tell you to fight it because trying to tell a new or expecting mom not to give into her desires to welcome her baby just isn’t something that, ah, any prudent person should do.
Instead, I’m going to frame it this way: Corporations know of the nesting instinct.
Boy do they know about it… and they spend billions of dollars aggressively trying to tap into it.
Don’t believe me? Pretend you’re an expecting parent and do a couple Google searches: “home essentials for new baby,” “what do I need to buy for a new baby,” “What is my due date?”
Pay attention to what happens next in your news feeds. I wouldn’t be surprised if a mysterious box of sample formula arrives at your doorstep next week, without prompting, as happened to us and as happened to my business partner.
Just be aware that this marketing machine exists. It is tapping into your urge to prepare your space to give the best welcome possible. And you can do that without buying absolutely every possible thing you think you need. You don’t actually need 90% of it.
My business partner has a great example of how the New Baby Marketing machine whipsaws your emotions. When she was awaiting the arrival of her first born, she had been convinced her baby needed an electronic baby sock that he would wear when he was asleep and that would alert her if ever her baby stopped breathing. (Maybe you’ve seen the ads. It’s called an Owlet. It is not cheap.) By the time it arrived, she’d read a bunch of reviews about how the device actually could burn babies’ feet. And why would she want her newborn child strapped to an electronic device all night anyway? She returned it immediately. But it just goes to show how crazy this stuff can get.
Our best advice to combat this: Avoid the temptation to make impulsive buying decisions. Wait for your expensive bundle of joy to hit the scene. After which, you’ll have plenty of time to figure out what you really need and don’t need.
Tip #2: Don’t Be Reluctant to Accept Hand-Me-Downs and Used Toys
I know a lot of people can be weird about this, especially first time expecting parents.
You consider it your moral, God-given duty to sacrifice your hard-earned dollars to physically purchase all of the things for your new child. And if that scratches some itch for you, do it a little bit. But then quickly get over it.
Your child will wear the $20-per outfit you buy for a week. Babies don’t actually play with baby toys. And shoes… do babies actually wear baby shoes? They can’t walk — what’s the point?!
New toys, new clothes, new “things” for baby will ultimately just eat a huge hole in your pocket. You will derive no meaning from them. They will go into a “donation” bin very quickly… and the money you spent will be lost.
Plus, watch what happens to your child when you have an abundance of new things constantly around. You will witness increasingly less and less interest. “Oh a new box to open — awesome! Now I’m going to utterly destroy this new toy and scatter all the pieces around so you can put them in random baskets so that I can never play with the assembled toy again.” Watch as your child become spoiled, doesn’t appreciate the value of a gift, doesn’t learn to care for things, etc.
This is the curse that “newness” brings.
Kids love boxes. And kitchen utensils. And dirt. Your child is not going to be intellectually penalized because you didn’t cop for the Lovevery monthly toy subscription. Accept used toys and clothes from friends. Your kids will actually love them more because it has meaning.
And you will pocket — and ideally invest — all the money you saved.
Tip #3: Buy for Your Goals, Not for Your Needs
Look — if you’re a first-timer, acknowledge you’ve never done this before. You don’t actually know what you’ll need.
But for some things, you can look out into the future and plan your purchases better now.
Don’t do what we did and buy an expensive single stroller that’s not compatible with the car seat…
And then buy another car seat-compatible stroller… only to have another kid two years later and need the double stroller instead.
Same for beds. Avoid the expensive baby crib, only to need a toddler crib in a few years. Then an actual bed. Get the fully convertible option — sure, it’s more expensive, but it’ll also likely retain its value such that when you’re ready to resell it secondhand, you’ll get a good chunk of your investment back.
Tip #4: Hunt for Deals on Your Big “Must Get” Purchases
Start up an Amazon watchlist and wait for your big items to go on sale before buying.
Better yet, get on Facebook Marketplace and OfferUp and other secondhand markets you trust. You can pick up a lot of your big, must-get purchases from other parents who did not read this article and are likely experiencing buyers’ remorse this very instant. Brand-new or near-new products they only used a few times.
Bonus Tip: Put the Big Items on the Baby Registry.
Don’t make the mistake of asking for clothes your baby is going to grow out of in a week.
Put the big, expensive items on your baby registry: car seat (infant and big), stroller, double stroller if you’re planning on multiples, crib (make it convertible!), bassinet, travel crib, high chair, baby swing, etc. You can find lists on the internet of the big items to consider.
Nothing sucks more than getting baby shoes for a two-month old when you have splurge for a travel crib months later because you neglected to ask for it as a gift.
Speaking of registries, we recommend setting up on Amazon’s Baby Registry. You get a free box of goodies when you enroll. But more than that, for the first year of your baby’s life, you get a 20% diaper discount. Plus, if you have a Prime card, you earn an extra 5% more back. This adds up.
If you’re a big Amazon user, look into Amazon Family. It’s a $99/year subscription add-on to Prime. But it offers all kinds of discounts on kid things. Add in the 5% savings from the Prime card and you’ll rack up usable points you can redeem on the regular.
Tip #5: Join a Community (Free Advice, Free Events)
You’d be surprised how much great advice is missing from the average “new parenting problem” Google search.
The best tips and advice for new parents aren’t found on Google…
They’re found in secret and closed mom and dad groups on Facebook and other community and social media platforms.
Groups for Kids with Eczema… groups for Constipation and Potty Problems… Groups for “Moms of Kids Born in June 2020”… FREE local events and happenings…
Got a question about a parent thing? There is probably a group for it with great advice from parents currently dealing with the same issues you are.
I know first-hand from seeing my wife and business partner seek out these communities: They are life rafts of experienced, qualified solutions and information when you feel like you’re in over your head.
This advice is offered freely. It doesn’t require special doctor visits or expensive expert consultations (ahem — sleep consultants). And where humans once had a village to fulfill this role, today, these online communities are the substitute.
Tip #6: Buy Your Kids a Gift That Pays Off Their Whole Life
That was a fun foray into feel good things…
Let’s get back to brass tacks, and what this blog is actually about: Wealth. How to make more of it, how to keep it and not lose it senselessly, and how to create a legacy for your family that will outlive you.
Which brings us to this last tip, and my personal favorite on the topic of “things to buy and not buy for your kids.”
I’ll keep this section brief, because we’re in the process of writing an extensive report on it. But it ultimately involves buying a special form of life insurance for your children while they are young — when annual premiums are cheapest.
I’m not talking about buying insurance on your life. But on your children’s lives.
Hear me out, there are some moving parts to this one.
You’ve likely heard of life insurance. You buy a policy now, pay the annual premium, so that when you die, your family receives a lump sum of money intended to replace your earnings, or pay off your debts, or cover big future expenses like your children’s college education.
Most people are familiar with term life insurance, which I agree is a mostly garbage product.
Term life insurance is simply a policy you pay into that guarantees a payout upon your death, but the policy is only in force for a pre-selected duration, between 10-30 years. Basically, you’re making a gamble on when you’re going to die.
“If I die in the next 10 years, my family will receive $500,000 dollars upon my death” is the guarantee you’re signing up for. And to keep that promise in place, you’ll pay an annual premium.
When the 10 years is up, if you’re still alive, they money you invested is lost forever. We say these policies “have no cash value,” because there is a $0 payout when the term is up.
Whole life insurance is different. A whole life insurance policy is in force for your entire life, until the day you die. (Or rather, your children’s lives… but we’ll get to that in a moment.)
There are two components to a whole life insurance policy: the death benefit (paid out upon the policyholder’s death to his or her heirs) and the cash value.
Yes — your annual premiums live inside the policy, and compound, throughout the entire life of the policyholder. (Savvy readers know where I’m going with this.)
With whole life insurance policies, did you know you can...
Compound your wealth at up to 5% over the long term…
Enter a contractual, guaranteed minimum growth rate of 4% or more...
Pay zero taxes on gains each year…
Avoid risk of principal loss — unlike your money in the stock market, money invested in these policies won’t ever go down in value (even if the market crashes 50% tomorrow)
Safeguard your money with a company that has a century-long track record of safety, has endured depressions, recessions, wars, and the worst catastrophes the world has seen in the last 100+ years…
Shield your money from creditors or lawsuits (in most states)
Contribute an unlimited amount to it (unlike an IRA or 401(k), which have annual limits)
Avoid reporting it to the IRS at tax time
Tap your money at any time without penalty or withholding taxes
Take out loans at any time for any purpose (down payment on a new house, college education, new car), using your policy as collateral, without actually taking any money out of the account so that you keep the power of compounding intact
Build a line of credit to use for any reason — no questions asked.
Cash out prior to death should the policyholder choose to enjoy the benefits while still alive.
These policies are dense and there is a lot to cover here. (As I said, stay tuned in these pages. We’ll be releasing a book in the first half of 2023. In the meantime, you can get a good head start with this classic book from Nelson Nash, called Becoming Your Own Banker.)
I consider opening a whole life insurance policy on your children’s lives to be one of the greatest financial gifts you can give.
Why not on your own life?
Whole life insurance is expensive once you’ve entered adulthood. You may still ultimately decide to buy some — I recommend a blend of term and whole life insurance if you’re concerned about what a loss of your income might mean for your growing family. (These thoughts tend to surface once you start having kids.)
But whole life insurance on a newborn’s life? We’re talking about a couple thousand dollars’ per year in annual premium… for nearly $1 million in future payout.
Never again in their lives will they have access to such incredible wealth building benefits at such a cheap price.
And once they enter adulthood and start famillies of their own, they will have you to thank for planning ahead, and removing the burden from them of what happens to their families — your grandchildren — upon your child’s death.
I know, I know… a bit morbid for the average person. Most people don’t think and plan this far out.
But consider that in the meantime, for your children’s entire lives, they will have their own bank account they can tap into at any time, without question, by using these policies — without interrupting the compounding taking place within the policy, with their own wealth. They can use this money to buy their first car. To startup a new business. To buy a home…
I plan to use my children’s policies to teach them all about wealth — how it’s really made, how it really works, both the benefits and the dangers wealth can wield.
To teach them about investing, interest rates, loans, interest spreads, and so much more.
I’m excited to teach you about this concept in the future. In the meantime, if you’re curious to learn more about this idea — both for yourself and/or for your kids — make sure you get a copy of Becoming Your Own Banker by Nelson Nash.
Until then, stay tuned.
