Congratulations on adding to the family!
Consider yourself a pro — from bouncy swings to baby monitors, you’ve got this parenthood thing all figured out.
Bonus points if you’re also thinking about how your next child’s future education fits into your budget.
(If you’re not, now is a perfect time to start.)
Every penny counts
With another baby on the way, you should revisit where your money is going. Take a look at all costs and add items triggered by your newest family member. Hospital bills, day care and all those diapers will make an impact on your monthly bottom line. See where you can adjust, make cuts and set a plan that you and your family can stick to over time. Putting a little money into a 529 education savings plan every month may be easier than you think.
Reduce and reuse
If you’ve saved items from your first child, you’ll be able to reuse them for your second bundle. Bassinets, strollers, toys and more can make another go-round with baby number two. And with the experience you have from the first, you know what you really need versus what’s more frivolous. The savings on big and little purchases could be a nice chunk of money that you could use to start a new 529 savings plan.
Prep for tax time
Having another baby means updating your withholdings. Take a look at your tax forms and make adjustments to reflect your new status. You may owe less money or even receive a refund. That’s another great opportunity to contribute to a 529 savings plan!
Look for perks
Does your employer offer a dependent care flexible spending account (DCFSA)? You may be able to set aside up to $5,000* in your DCFSA from your paycheck before taxes are taken out and use the funds to pay for eligible dependent care services, such as preschool, summer camp or daycare. Since you deposit pretax dollars into the account, you reduce your taxable income, which could mean more money in your pocket and an opportunity to consider contributing more to your 529 savings plan.
Divide and conquer
Say you’re putting $100 a month into your first child’s 529 savings plan. You want to do the same for your second child, but you’re not sure how to save for two. It’s likely better for both children in the long run to have separate accounts.
In theory, your first child will go to college before your second. So you could use that $100 a month to focus on getting your first through college. You could put $75 in your older child’s 529 savings plan account and $25 in the younger’s. Since 529 savings plans are flexible, you can switch the beneficiary from one child to the other if there’s still funds in the larger 529 savings plan once your firstborn heads to campus.
*IRS contribution limit for 2025 is $5,000 per year if you are married and file a joint tax return or if you file as single or head of household.
