Starting a Family? Consider These Financial Issues First

Starting a family is one of the most important, life-changing decisions you can make in your life. With large decisions like these, a lot of things come into play. Living situation, city, jobs, and finances. 

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What are the Financial Costs of a Family?

Some costs are obvious: You may need to move into a larger house, your grocery bill will go up, and you will want to be thinking about that college fund right away. But other things tend to be missed when considering your budget, such as:

1. Childcare: Unless one of you plans on staying home full time, you will need to pay for childcare which can cost as much as $1,000 a month or more. Depending on your income, it may be cheaper to have somebody stay home until the youngest child starts school. This is another decision you’ll have to make along the way.
2. Health Insurance: Make sure that your health insurance plan covers the entire family and not just you or you and your spouse. Talk to human resources about upgrading your plan. If you both have jobs, you may need to reevaluate who's employer's coverage to use.
3. Travelling: The cost of travelling in general will go up as you require additional plane tickets, a larger car, larger hotel rooms, etc. 
4. Extracurricular Activities: As your kids get older, make sure to budget for hobbies, classes, sports and summer camp.
   
   

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How Much Should You Have Saved?

As of 2017, the average cost of raising one child for 17 years—for middle-income families—was $233,610. This doesn't mean you need to have that amount saved, but it's a figure to consider. It breaks down to about $13,750 a year, but of course it will fluctuate based on the year and the age of the kids.

As a baseline, you need to have an emergency fund of three to six months of expenses, including the expenses of the child. Ideally, you should have more. When budgeting for baby supplies, allow an extra 20%. Typically, people will impulse buy clothes and toys for the child.

Find out what paid parental leave your employer offers, and save accordingly. Bear in mind that pregnancy complications can extend the period of time you need to stay home. Also find out how much of maternity care and delivery your insurance covers. Maternity care is standard, but there may be a coinsurance or deductible to worry about.

Ideally, make sure you have enough in savings to cover six months of post baby expenses before you try to get pregnant. There's no magic number for this, it depends on your expenses and income.

How Can You Tell if You are in a Good Place?

So, you have enough savings, and you have made a baby budget that includes supplies, extra food costs, formula, etc., what else do you need to consider? There are two main questions you need to ask to determine if you’re in a good place to consider major life changes:

1. How stable is your housing? If you are living in an apartment with no rent control, then this might be time to consider whether you can afford a house or condo. Mortgage payments are more stable over time.
2. How stable is your career? Those savings can evaporate very quickly if one of you is laid off, and some couples end up in the nightmare situation of one parent quitting to take care of the child and then the other being laid off. Also consider whether your job expects you to work all waking hours and how easy it is to get a new job in your field.

Caldwell Trust Company is a trusted community leader when it comes to managing finances for your and your family. To find out how Caldwell Trust can help you secure your family’s future, contact us today.