Financial steps to take before your child starts kindergarten

Watching your children grow, change, and reach new milestones is often one of the most rewarding aspects of parenthood. The financial decisions you make at the beginning of your child’s journey can set them up for success in the future.

The first few years of your child’s life may feel like a whirlwind to your family. Before your child starts school, it’s a good idea to pause and reflect on your family’s current finances and long-term financial goals. The following financial steps may help you build a strong foundation for your family as your child grows up and prepares to start school.

Purchase or update your life insurance policy

With the right life insurance, you can protect your loved ones’ financial futures, even if you can’t stay physically by their side. Term life insurance is a financial safety net that can pay out a set amount of money to a beneficiary you choose if you pass away during a policy’s term. Permanent life insurance lasts your whole life, as long as you pay your premiums. So, you can rest assured that your family can manage expenses like mortgage payments, childcare, or tuition to maintain the same quality of life.

If you haven’t purchased a policy just yet, talk with a financial advisor to help you find the right coverage for your family’s unique needs. If you already have a policy, you can make sure it’s updated to cover your child’s growing needs.

Start saving for college

It’s never too early to start saving for college. According to the College Board, tuition at in-state public universities in the United States cost an average of $11,610 in the 2024-25 academic year. That number shoots up to $43,350 for private schools¹. Multiply that by four to get the cost of a degree.

Setting your kid up with a college fund can give them the flexibility to explore a wide range of college paths with less worry about student loan debt. It might seem early to start saving for a child entering kindergarten, but you’re at an advantage when you’ve got time on your side.

Consider a 529 plan

Any high-yield savings account might be suitable for a safe college fund. But designated education savings accounts may offer even more advantages. For example, the 529 plan is a tax-advantaged savings tool. Withdrawals from the account are typically exempt from income taxes as long as the money goes toward a qualified educational expense. (Other withdrawals are taxable and incur a 10% penalty).

If your child decides not to go to college, you can transfer the money to a new beneficiary, move it into a Roth IRA in some situations, or withdraw the funds². So, the money you save can still support your kid even if they choose another path.

Review your household budget

Any time your family reaches a milestone, increases or decreases income, gains a new regular expense (like a car bill), or sets a new saving goal, you should reassess your household budget.

If you don’t have a budget, you can start building one by tracking all your monthly expenses and your income. Then, sort your expenses by category, like “bills”; or “entertainment.”; Be sure to include savings goals and debts. Subtract your expenses from your income. If you’re overspending, you can try to cut down on unnecessary expenses, like streaming services or dining out, without cutting them out completely.

As your child grows older, your budget may shift in many ways. For example, maybe you’ll start factoring in a weekly allowance, tuition, or lunch money. Or perhaps you’ll actually save money on childcare when your kid starts school. Try to revisit your budget at least once a year moving forward to reflect those changes.

Build your emergency fund

A fender bender, broken bone, or leaky roof might throw your family’s finances into disarray if you don’t have a robust emergency fund. Experts suggest building enough emergency savings to cover three to six months of expenses, if possible.³ But it never hurts to save even more if you already have that amount saved. The more you can build up your emergency fund, the more of a difference it will make when the unexpected happens. And if a great opportunity comes your way, you’ll have money to take advantage of it.

Becoming a strong financial role model

The last idea doesn’t cost anything. When your child sees you making strategic, proactive financial decisions, it shapes their view toward money. And when you speak openly about money, your child will build up with the confidence and know-how to do the same. It’s sure to pay off.

The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value will reduce the death benefit and may affect other aspects of the policy.

Sources: ¹ research.collegeboard.org/trends/college-pricing

² http://www.investor.gov/saving-education-529-plans

³illinoistreasurer.enrich.org/articles/the-changing-nature-of-emergency-savings