Family
How to Prepare Your Finances Before Starting a Family
Starting a family can be a joyful and exciting time in your life.
Whether you’re single, married, partnered, giving birth, or adopting, you can enter this new phase of life with more confidence by focusing on what you can control. Here are a few specific things you can do to prepare, and feel good about the future you’re building for you and your family.
Figuring out finances
Raising a child to adulthood can have varying costs, but some estimates are that it can cost about $233,610 on average, or just under $13,000 per year. That might seem like a big number, but proper planning can help you manage it.
Health insurance usually covers the majority of the costs associated with childbirth, but every policy is different. The best way to prepare is to call your insurance provider. Ask your provider for estimates of the costs you’ll be responsible for, given the kind of birth you plan to have (such as in a hospital, at home, with a midwife, and so on).
You can also help prepare for the unexpected by padding your emergency fund or cash reserves before your new child arrives. A rule of thumb for emergency savings is to have 3 to 6 months’ worth of expenses saved away in a liquid savings account. Because you’ll be increasing your financial responsibility and obligations when you have a child, you may want to work toward increasing your savings to 6 to 12 months’ worth of cash as part of your family planning.
Building a budget
There are some expected, one-time costs you can plan and save for in advance. These might include purchases like car seats, strollers, and furniture like a crib or nursing chair. Build your shopping list now, so you have a better understanding of expected costs.
First, estimate how much you’ll need to spend in total, then divide that sum by the number of months you plan to devote to saving. The Bump website has a great breakdown of potential costs and expenses if you’re unsure of what exactly to expect to spend.
What could be even more important than a specific amount of savings in the bank is having the cash flow power to handle the ongoing expenses of having and raising a child.
Consider stress-testing your finances by estimating what your budget might look like post-baby. Try to stick to that budget for 3 to 6 months to assess what works. If you can comfortably handle a bigger budget, it’s an excellent way to feel confident about managing the finances of starting a family.
If you find you can’t manage the higher budget estimate, it might be time to look at reducing other expenses or increasing your income so you can handle the financial responsibility of starting a family.
Thinking through childcare options
Childcare often throws new parents for a loop, from choosing the right solution to dealing with the expense of the type of care you want for your child. To determine what makes the most sense for you and your family, start by asking questions like:
- What are all of your childcare options? (Listing them out in one place so you fully understand the choices may help with decision-making. The options could include daycare, help from relatives, part-time babysitting, hiring a nanny, or using a nanny-share.)
- Will you or your partner stay home?
- Do you have trusted family or friends nearby who are willing and able to help you?
- Do you have a budget for childcare services?
Taking care of you, too
It’s a good idea to plan not only for how you’ll care for your kids but also for yourself. Here are a few personal considerations you might want to address before starting your family:
- How could having a baby impact your work? Is the culture of your current job supportive of families and parents?
- Do you have health concerns? What proactive steps can you take now before trying to have a baby?
- Do you have a plan for prioritizing your health even after the baby arrives?
- How will you stay connected on this journey? The support of a community can make a big difference in your experience of starting a family.
- Are there local parenting groups based on your interests or needs? Free family events are great ways to enjoy and potentially meet other moms and dads.
- Which trusted friends, family, or health professionals do you trust to confide in when you need them? Whether it’s your mental or physical health, it’s essential to ask for help.
These are all great ways to stay connected to people who can help, support, and teach you along the way as you embark on this journey of parenthood for the first time.
The idea of starting a family can feel overwhelming, and that’s understandable. You have a lot to think about, but simply considering some of these points and doing what planning you can now before a new child joins your household, goes a long way. Getting your finances organized and ready, as well as thinking through what actions you can take right now without having to wait, can make you much more confident that starting a family is something you’re genuinely ready to do.
Nothing in these materials is intended to be advice for a particular situation or individual. These materials are for general information purposes only.