I’ve heard this question countless times over the last year or so and to be honest, I’ve been nervous to respond because my husband and I don’t have children. So I decided to ask some friends who are parents for their perspective.
One of the things I heard loud and clear: Kids are EXPENSIVE! If you wait to have kids until you can cover every conceivable expense, you will never have them. That being said, if having kids is a high priority for you, it is worth every penny. My friend Jillian put it perfectly: “Having a child is definitely more expensive than I had planned for; however, it is also way more amazing than I ever thought it would be. Being a mama is truly the most incredible experience I have ever had and I wouldn't trade it for anything.”
If you are considering having a child (or are already in the process of expanding your family), doing some intentional work to build up your savings and get your financial ducks in a row is a great idea. Here are a few places to start:
· Create a Strong Financial Foundation: Many of the parents I talked to focused on paying off debt and building up their emergency fund. Once their baby was born, they set up a college savings fund that family and friends could contribute to.
Tip: Don’t forget about just-in-case planning. Do you have a will? Do you have enough life insurance for each of you? What about disability coverage? Putting these little protections in place can be relatively inexpensive when you are young, and it can give you the confidence that your family will be protected even if the unexpected happens.
· Give Your Budget Some Extra Cushion: Even after putting extra money into savings, my parent friends were surprised how quickly this cushion evaporated — sometimes within the first few months. How much is enough to shoot for? One parent suggested: “If I could do it again, I would try to save enough to cover the hospital bills and the first couple years of doctor visits.”
Tip: Bulking up your savings is a great idea — you never know what unexpected expenses might come up. But even more important is making sure your budget can stretch to cover an extra person. Create a sustainable budget that can accommodate the on-going expenses of having an extra (and likely more expensive) person in the house. Use the rest of this article as a guide to prepare for these costs.
· Plan Ahead for Childcare: Almost every parent I talked with took a different approach to childcare. Day care, nanny, leaving the workforce to raise children—the right decision depends on your situation and parenting style. But one thing I heard was constant: Whether you hire someone else or you decide to stay home (thereby forfeiting another income source), caring for this new little person can have a big impact on your budget.
· Tip: Estimate the costs of different childcare options and work out the different budgets for each scenario. Don’t limit yourself to just one or two choices. Curious about child care costs and how to plan for them? Check out this article by the balance.
· Expect Higher Health Care Costs: As one parent put it, “Not only are you putting your body through a miracle, you are paying someone to take very good care of you while you do it.” Especially if you and your spouse are on separate health plans, once you add a child to the mix you’ll likely be paying quite a bit more per month for your premium and have a higher out-of-pocket maximum for your family.
Tip: Review your benefits to see how what you pay for your health care will change one you add a child to your plan. If you can, put more money away in your Health Savings Account, if you have one — even if post-partum and well-child visits are covered by your insurance, you may be making more trips to the doctor than you expect.
· Get Ready for a Jump in Everyday Expenses: The biggest things the parents I talked to stressed is that diapers, wipes, clothing, shoes, food, formula, and baby gear adds up faster than you can imagine. One dad said, “Every trip to Target is $100 or more … and we go to Target a lot.”
Tip: Get as much “experienced” stuff as you can. Don’t be afraid to accept hand-me-downs — kids outgrow clothes faster than you think. Parents also recommended taking advantage of sales, discount bins, and gently-used items.
I realize this article may have given future parents out there a larger sense of anxiety rather than confidence. As one of the parents I talked to put it, “To be honest, I think that if people really sat down to calculate how much money kids are going to cost, no one would have kids! It's not a smart financial move. So, I guess my advice would be to remember the bigger picture when financial stress sets in.”
So what does that bigger picture look like? For all of you future parents, I invite you to name your “why” for having kids. Share this “why” with your partner, your family, and your friends so they can remind you of it when the going gets tough. Find an image that brings this “why” to life for you. Let this be your reminder when tensions get high.
Remember: One of the best things you can do for your child is take steps now to keep finances from being one of those tensions. Set a firm financial foundation, save what you can, and go into parenthood with your eyes open —aware of what future costs may be. Looking for a partner to walk you with you on this journey and help you financially prepare for your bundle of joy? Check out my big goal strategy session. We’ll work together to help you get your ducks in a row as you prepare for this new addition to your family. Use the code: BABY for $50 off your session. Don’t delay this offer is only available until the end of March 2019!
Are you a parent? Share your advice for soon-to-be parents below!
P.S. - This week I’ll be doing my Facebook and Instagram Lives on WEDNESDAY at 8pm instead of Thursday because on Thursday night my husband and I will be heading out on a special long weekend getaway to the North Shore of Minnesota. Can’t wait! Whether you are preparing for kids or not, join me on Wednesday at 8pm for some tips to help you create a strong, financial foundation.
A special thank you to my dear friends Peter & Kristin Bauck, Michelle Boss, Amanda Hoefs, Lisa Kloskin, Jillian McCorison, and Ellyn Steidl for offering such great advice.