Bringing up Baby on a Budget

Managing the expense of a child requires more than careful spending. "New families should save systematically. That is, they should pay themselves first by putting 10 percent (at least) each month into a savings program," suggests Eric Aafedt, president of MarketFN.com. A forced savings plan, where money is deducted directly from your paycheck and placed into a savings account or investment program, is the best way to make sure you are meeting your savings goals. Savings must be a priority and should be like a bill you pay every month.

Creating a healthy savings account can seem impossible if you can't shave much off your budget, but you can save more than you think. "As a child moves through life stages and their associated costs, don't pocket the savings on diapers, daycare, formula, etc. Rather accumulate the former weekly diaper money and place it away in a savings plan," recommends Brice Harrington, director of 529 plans at MFS Investment Management.

Other ways to build savings include putting away money given to children as gifts, asking relatives to contribute to a child's savings account or college account instead of buying gifts, and saving money you receive as rebates or tax refunds. Even a small savings plan that allows you to save $10 or $20 a week can add up to over $1,000 a year.