Is there ever a perfect financial time to plan for a baby? As someone who’s faced an unexpected pregnancy, I have pondered this question many times, and I’m sure I’m not the only one. Initially, raising a child without solid financial security was tough. Even after getting to a better financial position, the thought of affording another baby while keeping up with other financial goals can still be intimidating.
Raising a child is expensive, and ideally, you’d want to have all financial aspects sorted out before deciding to have a baby. There are many factors to consider, and financial readiness is one of the most important.
From a financial perspective, it might never seem like there’s a perfect time to have a baby. To make this journey smoother, being prepared is crucial. You need to be ready for higher expenses and potentially more earnings.
Here are some key financial aspects to consider before deciding to expand your family.
What’s your savings situation?
Some reports say that raising a child from birth to 18 years might cost around $233,610 in total. Regardless of whether you agree with this number, it’s essential to save more money to handle the costs of raising a child properly.
You might start saving for college, but it’s crucial to also expand your emergency fund. As your family grows, so do the chances of unexpected expenses.
Before having children, you might have felt comfortable with savings that covered three months of expenses. But with a child, aim to have savings that cover 6-12 months of expenses.
Setting up a dedicated “baby fund” from the beginning can help cover regular baby-related expenses like clothes, food, and supplies in the early months.
Being prepared with more savings will help you avoid debt and borrowing money to support your child’s various needs.
Don’t forget your retirement plan. Will becoming a parent affect your retirement age? It’s great if you’re in a position to save more before having a baby.
Medical Bills
Many new parents are unprepared for medical bills related to pregnancy and birth. Regular doctor visits during pregnancy and routine checkups and tests will be necessary.
Labor costs also need to be considered. A study by the University of California, cited by NerdWallet, states that an uncomplicated vaginal delivery can cost between $3,296 to $37,227, depending on the hospital. Cesarean sections can range from $8,312 to nearly $71,000.
Given these costs, it’s vital to have good health insurance to minimize out-of-pocket expenses. Make sure your health insurance covers in-network doctors. It’s also important to prepare for medical costs that insurance might not cover.
Stable Housing and Transportation
You don’t need to own a house to have a baby, but stable and sufficient housing is necessary. Babies need space for supplies and gear, and as they grow, more space.
If buying a home is in your plans, make sure it fits into your budget and that you can move and settle before the baby arrives. A down payment of at least 20% can help you avoid costly private mortgage insurance.
For transportation, ensure you can afford to take the baby to regular doctor appointments and vaccinations during the first year. While owning a car isn’t mandatory, it helps to have a safe way to secure the car seat. You might also need a bigger or safer car.
Childcare
Deciding who will care for your child can be stressful if both you and your partner need to work. Childcare centers are an option if family or friends can’t help but can be expensive, especially 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 surpass monthly grocery, rent, or mortgage expenses, adding substantial financial stress to families.
While state-funded daycare assistance programs might help reduce costs, they are usually income-based. If your income surpasses the limit, you’ll need to budget these costs yourself.
Your baby can start attending childcare as early as six weeks, but some parents choose to extend maternity leaves to avoid this. If you plan to do this, arrange your work and income accordingly.
If you decide to stay home with your child and shift to a single-income household, discuss this with your partner and make sure it’s financially doable.
Consider solutions like increasing savings, seeking a pay raise, cutting expenses, or finding a flexible part-time job to maintain a healthy financial balance.
Summary
Having a baby usually leads to higher expenses and tighter budgets. The key is to prepare your finances well in advance. Ideally, when planning for a baby, you should be financially stable and ready to take on this responsibility.