When I found out I was pregnant with my son 12 years ago, I worried: Would I be a good mom? Could I handle caring for a tiny human who was totally dependent on me? Would my son be healthy?
The one thing I didn’t worry about was money — not because I was independently wealthy (I wasn’t). At the time, I was totally naive about what it really costs to raise a child, which, in case you’re wondering, is around $233,610 from birth to age 18 for a middle-income family (not including college).
Fast forward seven years. When I remarried and got pregnant with my daughter, now 5, I had a much better idea of the budget I’d need for her birth and beyond since I’d “been there, done that” with my son. I even calculated how much money I’d need to meet the deductible between pre-natal treatments and labor & delivery at the hospital before my health insurance kicked in (#financenerd).
Still, there were challenges and new expenses. Here’s what I know for sure after having two kids: You’re never fully prepared, financially or otherwise, to become a parent. That said, planning ahead can help alleviate some of the financial stress that comes with a growing family.
A Financial Checklist for Expecting Parents
Every family’s circumstances are different, and, obviously, the answer to the question “are we ready for a baby?” is 100% a personal decision. There’s never a “perfect” time to start a family. That said, here are some tips to get your finances in order so the only thing keeping you up at night is that new little bundle of joy:
Talk it out
New parents should talk — to each other and other parents —and set their financial expectations accordingly. Before their son was born, my brother Jim and his wife Sara looked at their finances from multiple angles. “We talked a lot to each other, and spent some time looking over our budget. We had some conversations with friends about the costs of childcare. We did not have any formal discussions with a financial planning professional,” Jim notes.
Start saving early
When preparing for baby, consider saving several months’ pay ahead of time, especially if you plan on taking significant time off to enjoy your little one. Having a cash cushion makes bringing home a newborn a little less stressful. Russ Thornton, a financial advisor and founder of Atlanta-based Wealthcare for Women recommends building a liquid emergency fund of 6-12 months of living expenses, just to be safe. That may seem like a lot, but it’s easier to do the earlier you start.
Create a budget
In addition, Thornton suggests expecting parents get on a written budget as soon as possible, and try to estimate their expenses after baby, including things like furnishing a nursery, diapers, and all the supplies and related expenses that go with caring for an infant. Looking back, taking stock of these costs is something I wish I’d done before I had my son.
“You’ll need to be mindful of the trade-offs between continuing past spending behavior vs. providing for your growing family.”
“Children introduce additional moving parts to a family’s finances… you’ll need to consider the cost and frequency of expenses like dining out, travel, concerts, etc.,” Thornton explains. “I’m not suggesting that you can’t continue to do these things, but you’ll need to be mindful of the trade-offs between continuing past spending behavior vs. providing for your growing family.” He also recommends couples pay off, or at least pay down, outstanding debts such as student loans and credit card balances before baby’s arrival.
Get to know your company’s leave policy
My Israel-based employer had to create a brand-new maternity leave policy since I was its first US employee to have a baby. The Family and Medical Leave Act (FMLA) guarantees 12 weeks of unpaid leave following the natural birth or adoption of a child. However, there are no laws in the US that guarantee paid leave of any kind, and FMLA didn’t apply to me as a work-from-home employee.
My employer was generous enough to pay me part of my salary for a certain number of weeks while I was on maternity leave and guaranteed me the same or a similar role when I returned to work. Every company is different, so make sure you look into your employer’s maternity or paternity leave policy well before the baby arrives.
Have a plan for childcare
Childcare in America is costly, but with both parents working in most households, it’s also a necessity. According to Childcare Aware of America, the average cost for a year of full-time care for an infant ranges from $5,496 in Mississippi to $16,549 in Massachusetts.
Jim and Sara both work outside the home, and their childcare arrangement evolved over time. They knew they wanted Sara to stay home with their newborn son for a minimum of three months. However, once that time was up, neither was emotionally ready for their son to go to daycare. So Sara went back to work part-time, and they hired a nanny to help out.
“This was a relatively straightforward budget calculation to determine the percent of time Sara would need to put back into work in order for the numbers to make sense,” Jim says. When their son was 18 months old, they enrolled him in daycare and Sara returned to work full time. Jim and Sara achieved financial and emotional peace of mind by choosing flexible work and childcare arrangements that fit their family.
So, can you afford to have kids? Ultimately, that’s up to you. You don’t have to be rich to have a baby, but planning ahead and saving can help you feel more financially secure when the time comes.
This article was written by Robyn Kurdek, a financial writer who focuses primarily on workplace retirement plans, investing, and personal finance.