Starting a Family
When some people imagine having a child, they feel only excitement. Others are gripped by financial anxiety. After all, raising a child isn’t cheap, and the stakes become so much higher with a small person relying upon you. No wonder that some of us “nest” by calculating out our budget to the penny! Having children can drastically change your money mindset and your spending priorities.
Estimates for the cost of raising a child range from the blithe cliché, “Every child is born with a loaf of bread in its hand,” to the staggering price tag of over $233,000. In reality, the actual cost will vary, but it’s never free. Children eat, they grow out of their clothes, they need medical care, and they may want to go to college. These aren’t expenditures you can be ready for without planning.
The best idea is to start planning for the cost as soon as you start thinking of having a child. The next best is to start today, even if you already have kids. A financial advisor can help you rethink your finances and build them into a stable foundation for your growing family.
Pre-Birth Planning
Before you even get pregnant or plan an adoption, it’s wise to look ahead at the course of your career and finances. Will one of the parents need to take a career break? Will a new job provide better insurance or family leave than you currently have?
During the pregnancy is a good time to calculate what you expect to spend on the birth itself. If you have an insurance deductible or coinsurance, you should be able to get an estimate of how much you will be responsible for out of pocket for an uncomplicated birth, and what your coverage will look like in case of a complication. Start saving as soon as you know a baby is on the way, so you won’t be surprised or stressed about medical bills when the baby arrives.
It’s also smart to start saving right away for things like childcare expenses, diapers, nursery items, and other baby equipment. You can make a budget for what your finances will look each month with a baby, figuring in lost income, childcare, and the baby’s needs. A financial advisor can help you identify areas where you can cut back and help you work out a plan to pay down debt before the baby arrives.
Post-Birth
Once the baby arrives, the baby-related costs will begin to pile up. From diapers, to formula, to clothes that they outgrow in months or even weeks, your bank account will take a hit—though hopefully not an unexpected one.
It seems strange to start saving for college while the baby is still in diapers, but it will pay off if you are able. College can cost $100,000 or more over four years, and the fewer loans your child is saddled with after graduation, the better. Many experts say it’s better to save for retirement before college, but a financial advisor can help you make the decision that’s right for your situation.
Even if you don’t have a plan to save for college monthly, you may want to start a small fund anyway, to invest monetary gifts from family members. A 529 account is an excellent choice, because it will allow you to earn interest while deferring taxes.
Life insurance is a crucial consideration. Your child is entirely dependent on you and your spouse’s income. If anything happens to either of you, a life insurance policy can provide for their needs. That includes a policy on a non-earning spouse. A stay-at-home parent might not be bringing home money, but the family absolutely relies on their unpaid labor. If you already have a policy, you may want to increase it to cover the costs of caring for your child. If you don’t have one, it’s time to find one for yourself, your partner, and potentially your child.
A financial advisor will be able to guide you on how much insurance you need in the event that something happens to you or your partner.
Consult with a Financial Advisor Today
Whether you are still dreaming of starting a family or already have several children, it’s time to consult with a financial advisor if you haven’t already. Providing 18 years’ worth of care for your children is one of the biggest financial expenditures you will ever make. Make sure you have a plan to support your children and set them on a course to financial independence.
If you’re ready to meet with a financial advisor, contact us today. Here at Advice Chaser, we specialize in matching you with a financial advisor who will work best with your personality and lifestyle.
After you fill out a short questionnaire, our advisor concierges will schedule a phone call with you and then work to match you with someone who best fits your needs.