That tiny new baby you brought home from the hospital is priceless, but raising him or her is the most expensive thing you’ll ever do. While you can’t really place a price on a child’s love and happiness, the government annually issues reports on the cost of raising a child. In 2008, the U.S. Department of Agriculture estimated raising a child to adulthood runs an average of $221,190 for a middle-income family. That figure varies depending on where you live and whether your child goes to college.

While new parents are focused on diapers, sleep loss and baby bubbles, long-term financial security is often overlooked. Here are 10 of the biggest financial mistakes new parents make.

• Overspending on baby: New parents tend to go overboard in setting up a nursery and buying for baby. While that’s understandable, your baby will use a crib and other infant items for such a short period of time it makes no sense to spend a bundle. Set up a spending plan before you start the nursery. Accept hand-me-downs or shop yard sales and second-hand stores.
• Skimping on life insurance: Now that you’re responsible for another life, it’s time to take a closer look at your life insurance coverage. Even if you and your spouse have some coverage through an employer, that’s rarely enough. If you’re both healthy, group insurance rarely costs less than individual policies and isn’t portable, should you lose or change jobs.

Each parent should have a minimum of $500,000 in life insurance, or roughly five times their earnings plus the total of your home debt and enough to coverage college tuition for each child. Stay-at-home spouses should have the same coverage, including the cost of hiring full-time child care. Most planners recommend term insurance for new parents as it’s the simplest and cheapest kind. The term should see your youngest child through college graduation, when you can convert to a permanent, whole-life or variable-life policy.

• Ignoring disability insurance: Disability coverage is even more vital because you’re statistically more likely to be injured than die while in the work force. If you become disabled, most employer-sponsored coverage will pay 60 percent or less of your salary. If you’re earning less than $100,000, that may be sufficient but people who earn more should add a supplemental plan. To determine how much coverage you need, calculate what it would cost to maintain your standard of living if you were unable to work.
• Life insurance for your baby: Don’t bother. The only members of your family who need life insurance coverage are those whose death would create a financial hardship.
• Delay saving for college: It’s too late to start saving when a child enters high school. The best time to start that college fund is when each of your children is born. There are a couple tax-free options. A 529 College Savings Plan requires at least a $25/month contribution, up to $250,000/year. Coverdell Education Savings Accounts, formerly known as education IRAs, allow you to contribute up to $2,000/year in a tax-free account. The income limits are $220,000 for couples filing jointly and $110,000 for singles.
• Not taking advantage of tax benefits: One tax break many parents overlook is the ability to sock away up to $5,000 in pre-tax money for child care through flexible spending arrangements (FSAs), offered through larger employers. If both parents are working and your child is less than 13, you can take advantage of the government’s child-care tax credit. Don’t forget the annual $1,000 child tax credit, which applies to children under age 17. Couples who file jointly, have only one child and make no more than $110,000 can claim the full $1,000.
• Not making a will: Many with small estates assume they don’t need a will. Parents need a will to designate guardians and an executor. A court will appoint guardians for your child if both parents die without a will. Spend $500 to $1,000 on an attorney to help you draft the will. Include two back-up guardians and executors, in case the original designates are unable to handle these duties. If the cost of an attorney is prohibitive, there are various do-it-your software programs that allow you to create your own will.
• Forgetting retirement savings: Too many parents worry about getting their child through college and forget about their own retirement. That’s a big mistake. Saving for retirement should always come first. You and your child can figure out various ways of getting through school but he or she may not be as thrilled if you have to depend on them during retirement. Max out an IRA, a 401(k) or whatever retirement plans available to you. A stay-at-home parent should contribute to a Roth IRA, which takes after-tax dollars.