This article was last updated on January 5
Starting a family is a big step to take, this goes without question. This step manifests in many ways and one that is particularly noticeable is how having children can impact your finances. Children are a lot of things: lovable, inspiring, purpose-giving, and expensive. Some people think that buying a home is the largest investment they will ever make, but they have forgotten to consider the cost of raising a child, let alone multiple children. Starting and raising a family far exceeds the costs of purchasing a home and by a lot. The truth is that if money was the only consideration for having children, it is likely that more people would be childless.
Family planning is a serious and important strategic step in the transition from supporting just yourself and your spouse, to including another human that will be constantly growing and changing for the better part of two decades. You will be responsible for the well-being of this new individual and this responsibility will often be felt in your wallet. If you are serious about planting another seed in this world, then you should take the financial implications seriously. After all, if you are prepared for what is to come then you will be more capable of enjoying the beauty of family life.
Start your family planning by considering the basics- how to maintain a budget, a savings plan, and some investments. In the beginning you will be faced with a temporary loss of at least one source of income from pregnancy and the birth itself. In addition you will have the added expense of medical bills, diapers, strollers, baby clothes, baby shampoos and soaps and more (the list really does go on). You should start by checking with your employer to see if you have short-term disability coverage; this typically covers 60 to 70 percent of your income for a six week period. If you don’t have paid leave, you may still be able to take up to 12 weeks of unpaid leave due to the Family Medical Leave Act (FMLA). But if you don’t have paid leave, you will need to strategize about finances that much more.
If you and your spouse do not already have combined health plans, you should consider combining them if it will likely reduce your total monthly premium costs and this way you only have to make one payment each month. You will also need to update your car insurance coverage once the baby is born. This may raise your monthly premiums, but a great way to minimize costs all together is by combining your health insurance, car and home (or rental) insurance into the same provider. Insurance companies often offer discounts if you prescribe to more than one of their services.
Start a baby fund as soon as you even have the idea of starting a family. Open an account that you contribute a set amount to each month so that you can start to build up a savings for unexpected expenses in the future. Children and unexpected expenses are as real as the Pope is Catholic, so get ready. You can use this money however you want in the end, but the point is just to have money readily available for when the baby arrives. If you are fortunate to have excess funds in this account after all the baby expenses then move this money to a tax advantaged 529 account to start saving for your babies future education needs.
It is wise to start exploring potential child care options ahead of time. This way you can take your time to find something that works for you and is affordable. Child care is one of the biggest expenses of raising kids, especially in the early years when special needs apply.
When purchasing baby equipment, be sure to bargain hunt, find discounts and get used items whenever you can. It is important that the stroller and car seat be of top quality for safety purposes, but most everything else can be second hand if you can find it. Start by asking friends and family for any hand-me-downs that they don’t need any more; if you can get stuff for free, that is the best. If nothing is available there, then go to used furniture stores or shop online for second hand items.
The most important thing to keep in mind is the basics of all financial endeavors: budget, save, invest. That being said, take time to map out what your expenses will look like once you have a baby. The more prepared you are the better. Ideally you will plan far enough in advance to give yourself time to cover all the bases before the baby is born. This enables you to sit back and enjoy the precious years of parenting with limited financial strain.