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These days, planning for a baby involves sifting through a lot of competing advice. Which stroller is the right stroller? Does tummy time really matter? Which kind of early childcare should you go for? Daycare or a nanny share? You’re not alone if weighing these decisions sometimes feels like a second job, and the same can be true when it comes to your family’s finances. As you seek out advice about planning for your kiddo’s financial future you’ll be flooded with opinions. From the best way to start a college fund to building a nest egg for surprise expenses, you may even come up against financial “truths” that don’t always hold up.
This can be especially confusing right now when costs are so high. Case in point: According to a new Vanguard study, nearly 70% of parents say that they are spending more on child-related expenses than they expected to. The good news? There are smart, simple ways to save that don’t require becoming a finance expert. Below, we’ll break down a few common money myths—and share how modern options like Vanguard’s Cash Plus Account can help you save with more confidence as you prepare for parenthood.
Myth #1: Emergency savings can wait until after the baby arrives.
There are some things you can put off, like deciding which high chair is good for baby’s first bites or landing on the perfect nickname. Savings isn’t one of them. Having a child is expensive—more than half of parents (51%) reported spending an estimated $1,000 or more in the last year on unexpected or emergency expenses for their children, with 17% spending $5,000 or more. That means it’s crucial to start saving as soon as you can, so that your family can weather any unexpected costs that come up while your kid is still little. Even setting aside $20 a week or aiming for a first milestone of $500 can create a meaningful cushion over time.
Myth #2: A traditional savings account is the smartest place for your money.
It’s great to have savings, and for many parents, that money lives in a traditional bank account because it feels familiar and safe. And “safe” can seem easy, but it could be costing you, especially when you’re planning for diapers, doctor visits and the unexpected. The truth is nuanced though, since those accounts often earn very little interest.
For example, if the cost of everyday baby essentials—like diapers, formula, or childcare—goes up each year, but your savings account barely earns interest, your money doesn’t stretch as far as it used to. A few years ago, a month of diapers might have cost one amount; today, it costs more, even though your savings balance looks the same. That means while your money isn’t going anywhere, it’s also not keeping up with the real costs of raising a family. Over time, your savings may lose purchasing power, even when you’re doing everything “right.” In some cases, earning just a bit more in interest each month could mean covering a box of diapers without dipping into your principal.
So if traditional savings aren’t always the smartest place to put your money, what are your other options? Let’s demystify some myths about high-yield savings accounts.
Myth #3: High-yield savings options are complicated or risky.
If you’re not a money maven (or, you know, a bajillionaire), high-yield savings options can sound intimidating compared to a traditional account. Do you really need to get fancy with your money?
The reality is today’s high-yield savings tools are built for everyday families. They’re straightforward to set up, FDIC protected (meaning your money is insured by the U.S. government if a bank fails, subject to applicable limits), and you can still access your funds when you need them. Whether it’s a surprise expense or a planned cost, your money isn’t locked away.
The main difference is that these accounts offer higher APYs (Annual Percentage Yields), which measure how much interest your money earns in a year. In plain English: with this account, your savings can earn more interest over time, helping your money grow a bit more—without adding complexity or taking away flexibility.
Myth #4: You need to save a lot to make a difference.
If you don’t have a ton of extra cash left over each month, it’s easy to feel like saving “a little” won’t really move the needle—especially when family expenses add up fast. That feeling is completely understandable.
But the truth is, small, consistent amounts can add up more than you might expect. Saving $20 from each paycheck may not feel significant in the moment, but over time, that money earns interest—and then that interest earns interest, too. This compounding effect means your savings can grow faster the longer it has time to sit, even if you’re starting small.
The key isn’t the size of the deposit—it’s starting early and sticking with it. One simple way to make it easier is to set up automatic transfers so the money moves into savings before you have a chance to spend it (kind of like setting diapers or wipes to auto-renew so you never run out). Putting small amounts into an account that earns interest can help build a real savings cushion over time, giving you more breathing room as life and parenting inevitably throws surprises your way.
Myth #5: APY isn’t that important to consider at this stage.
Someone may have told you that APY isn’t something you need to think about right now. Your baby’s just arrived, after all. But here’s the thing: knowing your APY lets you see how much your money can grow. Because when you know your APY, you know how much interest your money is earning and how often. Just like you know when you’ll hit milestones like switching from a swaddle to a sleep sack, it lets you see how your savings can grow, which can be key to making big financial decisions about things like schools and housing.
Preparing for baby’s future with a Vanguard Cash Plus Account
You’re about to embark on an exciting, heart-expanding, life-altering journey. And while you ponder over bottles, bibs and bassinets, you can also take advantage of modern savings options like Vanguard’s Cash Plus Account that can help you save, grow your nest egg with care and enter this new chapter feeling confident about your family’s finances.
It’s an alternative to traditional savings accounts that offers competitive high yield potential while allowing you to keep short-term cash on hand for everyday expenses alongside long-term investments at Vanguard. In short, you get the best of both worlds. It’s a smart way to grow the money you work hard for—and at the start of the year (from January 7th through April 30th), everyone with a Vanguard Cash Plus Account will receive a .25% APY boost. APY will vary and may change at any time. Want to learn more about jumpstarting your savings with Vanguard as you prepare for parenthood? Start here.
This article is sponsored by Vanguard Group Inc. (VGI). Babylist’s free site, apps and emails are made possible by our sponsors. We limit our sponsored content to relevant partners that offer products and services we believe in and use ourselves.
Vanguard’s Cash Plus Account is a brokerage account offered by Vanguard Brokerage Services, an affiliate of VGI and a division of Vanguard Marketing Corporation, member FINRA and SIPC. The Cash Plus Account may differ from high-yield savings accounts or other bank accounts in various ways including what fees apply and whether services like check-writing are available. You may want to consider those differences before choosing which option is best for you.
