Financial Prep: Starting a Family

Starting a family can be one of the most exciting and fulfilling chapters in your life.  Let’s be honest though, that excitement is sometimes accompanied by some serious anxiety. Real talk here, children are wonderful and all, but expensive. In fact, according to the USDA, the average cost of raising a child can start at $234,000, with 47% of that amount going towards food and housing. Unless you’re lucky enough to be an heir or heiress, having a baby will require some financial planning. Ideally, budgeting for a child would start before jumping the gun on getting pregnant or adopting. But even if that’s not reality for you, taking asap action on the following important financial steps can help you no matter where you are in your journey.

Tackle Any Outstanding Debts 

Debt. Who doesn’t have it these days? The cost of college alone makes post-grad debt practically inevitable. Does that mean you can’t fulfill your dream of becoming a parent? Of course not! However, we would encourage you to work on reducing your debt as much as possible before starting a family, especially if you owe a lot of money.

Here’s what we’d recommend. Make a list of all the debt you carry. Do you have student loans? Credit card debt? Unpaid medical bills? Figure out how much you owe. If it’s excessive or you have several debtors, you might want to consider consolidating your debt through a personal loan, often with a possibly lower interest rate or more flexibility.

However, in order to truly tackle your debt and come up with a successful plan, you’ll also need to establish a budget. No surprise here, you’re going to need to make another list of your necessities versus nonessentials. Doing so will help you determine how much of your income needs to go towards necessary expenses, and what’s left over. The leftover should first be applied to your debt. The rest can go towards things you want. Remember, starting a family doesn’t mean you have to stop enjoying life!

For our single parents out there, when it comes to planning on being the primary parent, budgeting is even more important. Follow the same suggestions above, but setting up an emergency fund may take an higher priority for you. Try to save enough to cover at least 3-6 months of living expenses. This will ensure that if you were to lose your job, you have enough money to pay your housing and utilities, as well as food. Beyond an emergency fund, if there is a co-parent, discuss child support with them. Given that every dynamic is different, don’t necessarily have to involve the courts if it’s possible to have a cordial conversation on the matter. 

Focus on the Future

Once you have a child you’ll realize how quickly time flies. One day they’re like larvae and the next they’re graduating high school. How can you plan for their future?

Let’s talk about two ways – saving for post-secondary education and building generational wealth.

If you’re pro-college, it’s important to start thinking about the cost now. Don’t believe us? Think about how much your college education was and how much debt you’re carrying from it. Yeah, that’s what we thought. To help your child avoid incurring debt associated with college, there’s a few things you can do beyond setting up a 529 plan. Even before the baby is born you can start an informal college savings kitty. And if you’re planning to have a baby shower, include a college fund on your baby registry. It’ll last you way longer than 1,000 swaddles and that designer stroller that your baby will destroy in 2 months. Plus, you can continue this tradition when it comes to birthday and holiday wish lists for your child. 

Whether your kid decides to attend college or not, building generational wealth is one of the greatest ways to help your kiddo longterm. It involves passing down anything with monetary value from one generation to the next. There’s a few ways to go about it including, investing in the stock market and/or real estate, starting a family business, or buying life insurance. Not sure where to start? Think about what’s doable for you. If you’re a single parent, you may not have the same support to be able to devote to investing in real estate or starting a business. However, trading on the stock market or buying life insurance are relatively low maintenance options that can yield similar results. But if you’re business savvy, starting a business could easily be your best bet, particularly in today’s entrepreneurial market. No matter what you decide, make generational wealth a priority. 

Single or with a partner, you can do this parenthood thing! Do what you can to prepare financially and be sure to consider the other practical steps to take when preparing for a baby.