Is there ever an ideal financial condition to plan a baby? As someone who’s experienced an unexpected pregnancy, this is a question I’ve often reflected on, and I know I’m not alone. Initially, raising a child without significant financial security was challenging. Even after achieving a better financial standing, the idea of affording another child while meeting other financial goals can still be daunting.
Raising a child is not cheap, and optimally, you’d want all the financial aspects sorted out before deciding to conceive. There are many aspects to consider while planning for a child, among which financial preparedness is of prime importance.
Simply put, from a monetary standpoint, it might never seem like the perfect time to have a baby. To smoothen this financial journey, preparation is crucial. You need to gear up for higher expenditure and possibly more earnings.
Here’s a look at some key financial aspects to think about before deciding to enlarge your family.
What’s your savings situation?
Some reports suggest that raising a child from birth up to 18 years may cost approximately $233,610 in total. Whether you agree with this figure or not, it’s crucial to note that you’ll need to save even more money to aptly handle the costs of raising a child.
You may start saving for university fees, but it is essential that you expand your emergency fund. As your family grows, the possibilities of unforeseen expenditure increase.
Before having children, you might have been comfortable with savings to cover three months of expenses. But with a child entering the picture, it is advisable to increase this to cover expenses for 6-12 months.
Setting up a dedicated “baby fund” from the beginning can be useful to shoulder regular baby-related expenses like clothes, food, and supplies in the early months.
Preparedness with more savings will help keep you from debt and borrowing to support your child’s various needs.
Also, consider your own retirement plan. Will becoming a parent discourage you from retiring at a suitable age? It will be significantly beneficial if you’re in a financial position to save more before having a baby.
Medical Bills
One expense many new parents are unprepared for are the medical bills associated with pregnancy and birth. Mom will need regular doctor’s visits during pregnancy and routine checkups and tests.
Next, consider the cost of labor itself. A study from the University of California, as quoted by NerdWallet, states that an uncomplicated vaginal delivery may cost between $3,296 – $37,227, depending on the hospital. Cesarean sections can cost anywhere from $8,312 to nearly $71,000.
Given the potential costs, it’s essential to have a quality health insurance plan to minimize out-of-pocket expenses. Health insurance with access to in-network doctors is crucial. But, it’s also important to prepare for medical costs that the insurance might not cover.
Stable Housing and Transportation
While owning a house is not a prerequisite to have a baby, stable, ample housing to accommodate an infant is. Infants require space for supplies and gear. As kids grow, they need more space.
If buying a home is on the cards, ensure it fits into your budget and that you can move and settle down before the baby arrives. A down payment of at least 20% can help you avoid expensive private mortgage insurance.
For transportation, ensure that you can afford to take the baby for regular doctor appointments and vaccinations during the first year. While owning a car isn’t a must, it helps to safely secure the car seat. A bigger or safer car might also be necessary.
Childcare
Deciding who will care for your child can be stressful if both you and your partner need to work. Childcare centers can be a primary consideration if family or friends can’t help. They might be expensive, particularly for infants. According to Baby Center, the average cost of center-based daycare in the US is $11,666 per year ($972 a month). However, prices can range from $3,582 to $18,773 per year ($300 to $1,564 monthly). As you can see, childcare costs can easily exceed monthly grocery, rent, or mortgage expenses, causing significant financial stress for families.
While state-funded daycare assistance programs might help reduce costs, they are usually income-based. If your income surpasses the limit, you’ll have to budget these costs yourself.
Your baby can start attending childcare as young as six weeks, but some parents prefer to extend maternity leaves to avoid this. If you choose this path, plan your work and income arrangements accordingly.
If you want to stay at home with your child and adjust to a single-income household, you’ll need to discuss this with your partner and ensure it’s financially viable.
Rely on solutions such as increased savings, a pay raise, expense reduction, or securing a flexible part-time job to maintain a healthy financial balance.
Summary
Having a baby often leads to increased expenses and tightened purse strings. However, the golden rule is preparing your finances well in advance. Ideally, when planning a baby, you should be financially stable and ready to shoulder this responsibility.
