I believe he did it to make her murder appear as brutal as Collette and Kim's, to support his story about Manson-like intruders. I always wondered if he stopped for even a minute to consider leaving Kristy alive, since she was hardly a threat to his story of what happened. I think the thought might have crossed his mind, but he would have immediately dismissed it - no way was he going to be the sole parent to a little girl.
I am re-reading Fatal Vision now, about 500 pages in. What strikes me now are the chapters where Jeff is talking about Collette and his life. He just sounds so narcassistic. Which, to be fair, he was talking about his life etc but even when he talks about Collette, its not about the essence of her, it's about how proud she was of him, how worried she was when he wasn't there, etc etc. I mean, the book was written in a very different time in which many women put all their own value into a man, but still. And he talked about how the kids were happy and oblivious to any tensions in the marriage. It was just the perfect life, and he was the center of it.
I have always had the opinion that if he had not killed them, I believe he would have divorced Collette once he started raking in the money. Or she would have finally had enough of his philandering and she would have left him.