Planning for a Baby....Financially

"I want to have kids, but I'm concerned because they're so expensive."

I've heard versions of this statement many times over the years, and for good reason. It's no surprise that financial concerns are one reason many couples hesitate to have children. Citing the high cost of children and the personal sacrifices involved, many couples opt to wait many years to have children or forgo having kids altogether. This is me. I wanted children, but never thought I was ready, including financially. I've read some online articles from experts who say it does not make "financial sense" for anyone to have children. While this may seem to be true, the fact is that lots of couples still choose to have children despite knowing the costs. For many, the desire to start a family overrides the personal desire to be "financially sensible." I personally don't believe that having children means you are being financially irresponsible.

My wife and I welcomed a newborn son at the end of last year. Our days over the past several months have been filled with fun things (for example, smiles and cuddles, playtime, and watching him learn new skills), hard things (getting up at unexpected hours of the night), and things we've had to adjust to (like changing the priorities in our monthly spending plan). I've been personally learning about financial wellness while adding a new addition to our family. While I am no "expert" here and am learning as I go, there are some things that have resonated with me I'd like to pass along to you.

#1: Relax. Take a deep breath. You don’t have to have everything figured out right away. I tend to be someone who wants to think through as many outcomes as possible, financial or otherwise, before jumping in. Whether deciding family size or other big life decisions, I've had to remind myself that while it is good to be prepared, I will never be totally ready.

I believe the widespread anxiety and hesitation to have children comes in part because we often hear how expensive children are, and this may lead us to believe that children are a burden rather than a blessing. While it may be true that kids can be expensive, the amount spent on each child is different for each family and varies based on the season of life your children are in. I've found comfort in knowing that people with varying incomes, educational backgrounds, and occupations have found ways to successfully raise their children. So, if kids are on your radar, relax and take things one day and one season at a time while still reasonably planning for the future.

#2: Pay off your debts and save for non-monthly expenses. I realize it may not always be possible to fully eliminate your debts before having children. If you are able to pay off as much of your debts as possible, this frees up more disposable income that can give you flexibility in your day-to-day spending.

Regardless of whether you are debt free, everyone can get into the habit of setting aside money for non-monthly expenses. We all have expenses that are sure to happen, but may not happen every month. The car is going to need maintenance, the dog is going to need medical care, and Christmas will come every December. My recommendation to clients is to set aside a bit of money each month for these non-monthly expenses as if they were monthly expenses. For example, if you intend to spend $600 on Christmas gifts this year, then set aside $50 each month to prepare. Doing so will help you feel more in control of your money so that when these events happen, you simply pay the bills, no big deal.

#3: Set aside funds for baby. Whether you're pregnant, hoping to become pregnant, or are getting ready to adopt, you'll greatly benefit from setting aside money for your baby as soon as you can. It truly helped us to set aside funds in advance for things like childcare, car seats, a stroller, baby clothes, and feeding supplies.

Many new parents intend to take extended time off work or want one parent to stop working altogether. Funding a "parental leave" category in your spending plan will help offset this loss of income when the big day comes. If you currently have a dual-income household and anticipate one parent leaving their work to care for the baby, I recommend aiming to live on the income of one spouse while the funds earned from the second spouse are put into a "baby" or "parental leave" category. This will help you know whether being a one-income family is feasible while you still have access to the second spouse's income.

Final advice: The biggest piece of financial advice I would have for any new parent is to make a spending plan and begin setting aside money for the baby as soon as you can. Doing so will make your life much easier as a parent.

If you would like help planning for the costs of having a baby, contact me. I would love help you welcome your bundle of joy into the world with as little financial stress as possible.