4 investing tips for new parents

In the early days of new parenthood, the idea of planning for a future beyond the next load of laundry can feel ludicrous. If you’re focused on keeping a tiny human being alive (and struggling to remember when you last brushed your teeth), committing any time to investing decisions can be hard to justify.



That said, there are several investment choices you can make now that you and your child will be glad for in the future. As a bonus, these investments are generally the set-it-and-forget-it type, at least for a few years. So you can take care of them once and get back to the important things, like sleep.



Here’s what you need to know.



Write your will



There’s an excellent reason why the response to Barbie’s question of “Do you guys ever think about dying?” was a record scratch in last summer’s hit movie. No one likes contemplating their own death, especially when you’re in the love drunk phase of new parenthood. But getting an estate plan in place, including provisions for who will take care of your children and how your assets will be distributed, is a gift to your family and part of any sound investing plan.



Anyone with a large estate or a complicated family situation (such as a blended family) should consult with an attorney to make sure their wishes are followed. However, many new parents can get away with something a little simpler, like a reputable online will service . These services walk you through the process of writing your will and give you instructions on how to get your will witnessed and notarized.



It’s likely that you will want to make updates as your children and your assets grow, so plan on revisiting your will at least every five years or so. That will give you a chance to consult with an attorney if your situation changes after creating your first will.



Ask about HSA and DCFSA options at work



Depending on your benefits package at work, you may have access to two tax-advantaged accounts that can enhance your investing plan and help you save money: a health savings account (HSA) and a dependent care flexible spending account (DCFSA). Here’s how they work.



Health spending accounts



To qualify for an HSA, you must be enrolled in a high-deductible health plan (HDHP). In 2024, an HDHP is defined as a health insurance plan with an annual deductible of at least $3,200 for family coverage and an out-of-pocket annual maximum of no more than $16,100 for family coverage.



If you do have access to an HSA, then you can put aside pretax dollars to use for future healthcare spending. The money grows in the HSA tax-free, and if you don’t use it in any given year, the money will roll over and continue to grow tax-free. Finally, as long as you spend the money on qualified medical expenses—which include everything from diaper cream to doctor’s copays to breast pumps to baby sunscreen —you pay no taxes when you access the money.



As of 2024, you can contribute up to $8,300 per year to an HSA for family coverage. If you are eligible for an HSA through your employer-sponsored healthcare plan, then you can have your contributions taken from each paycheck.



Dependent care flexible spending accounts



If your workplace also sponsors a DCFSA, you may be able to contribute pretax dollars to this account to help pay for qualified childcare expenses. In 2024, families can set aside up to $5,000 into a DCFSA. The money grows tax-free, but unlike the HSA, the DCFSA is a use-it-or-lose-it account. You must forfeit money left over at the end of year.



Generally, you can use your DCFSA account to pay for childcare that allows you to work or attend school. Just remember that overnight camps and education are not covered by DCFSA.



The list of qualifying expenses include:




Care provided in your home by a babysitter, nanny, or au pair



Summer day camp



Before- and after-school care



Caregiver-provided transportation to and from childcare



Application fees and deposits for care




Open a 529 account



It may be difficult to imagine your little one heading off to college, but it will happen before you know it. And unfortunately, if tuition costs continue along current trends, a year of college at an in-state public university will cost upwards of $40,000 by the year 2042 .



That’s why it’s a good idea to begin investing in your child’s future by opening a 529 college savings account while they’re still in diapers. Money contributed to a 529 plan grows tax-free, and as long as the money is used for qualifying educational expenses, withdrawals are not taxed. While there is no federal tax benefit for 529 contributions, some states allow you to deduct a portion of your annual 529 contributions from your state income tax.



Opening a 529 account is relatively simple. You can find an account by browsing the options at the College Savings Plan Network . To open an account, you just need the beneficiary’s Social Security number—which means you can’t jump the gun and open an account for a child who hasn’t arrived yet.



But even though opening a 529 account is an important investing move for new parents, funding this account doesn’t need to be a major financial priority in the early days. Here’s why:




You need to prioritize your retirement over your kids’ college education. They can get loans for school. There are no loans for retirement.



People other than the owner of the account can contribute. The ability to invite others to make contributions is one of the major benefits of these accounts. Asking grandparents and other family members to contribute can be a great way for them to support their new family member.




Though you should not necessarily prioritize your child’s 529 contributions, it’s a good idea to set up a small regular contribution—even if it’s as little as $20 per month. You’ll be glad for it in 18 years.



The family that invests together . . .



It can be easy to put off the important-but-not-urgent decisions when you’re getting used to parenthood. But writing a will, looking into HSA and DCFSA options, and opening a 529 account are all relatively quick processes that will pay huge dividends.