Planning financially for having a kid (or two)
As a recent mom of twins, there’s obviously so much I could say about my newfound role as caretaker and love-provider for two little humans! However, today I’ll share about how becoming a parent has affected our financial life, and how it might factor into yours.
Clients often ask me what they should consider financially when planning to bring a baby into the world. Although it is often said that ‘there is no right time to have a child,’ and people have beautiful, happy children every day without such preparation, it is still useful information to ponder.
Initially having a baby does not need to be as expensive as it sounds, though ensuring a healthy financial life as a new parent or family requires some foresight. Years ago a client told me that she wished she had saved $10,000 before having her first child, and I second her advice. Even if you get most of the things you need from a baby shower, or through hand-me-downs from your community, I still recommend a healthy cushion of savings beyond your emergency fund. As someone who chose a pretty frugal track of preparation, it is also worth noting that it took significant time to find and actually pick up items from friends and neighbors — and when a household is dependent on two full-time incomes, this route might not be realistic.
What has having kids actually cost us so far?
~$2500 + 3 months of unpaid leave.
My partner and I value being frugal, not only because we want to consume intentionally, but also because we know that the less money we spend, the more time we have in our lives for being outside, playing with our kiddos, and doing things we love. That said, it was interesting to track what we did spend money on this year leading up to the birth of our kids. *You may notice this post lacks links to buying recommended products online, which is mostly because I do recommend looking to friends and family first, who might be dying to get rid some barely-used items collecting dust in their closet.
Professional services: $1510. Doulas, a birth class, and a lactation consult our first week home
Supplements and over-the-counter items. $417.62. Many of these were pregnancy-related and recommended by my doc. However, there were also many trips to the local pharmacy for OTC items to help with all sorts of exciting related ailments, from extreme itchiness to insomnia.
Maternity clothing: $91. Even will all the hand-me-downs, I still needed to look presentable for work!
Gear: $205: Weego twin carrier, future-bike-trailer, twin-sized pack-n-play.
Birth and new baby supplies: $140 (Diaper balm, pumping supplies, herbs, etc). I didn't even need to buy most of these items as friends gave me hundreds of milk freezer bags and new pumping supplies.
Lastly, and most-importantly, time off of work. This figure is going to be different for everyone, as some jobs will give paid leave, while others will offer disability pay for a certain length of time, and us self-employed folks will need to create our own fund for time off. Let's say your take-home-pay is $2500/month, and you won't work for three months -- then this could be $7,500 in income you may need to make up for. Personally I had to stop working 3 weeks before the kids were born because I was simply physically unable to. You never know what the end of pregnancy will bring! I recommend saving an extra month's worth of maternity leave income just in case.
Financial planning for having kids after maternity and/or paternity leave:
Though my own kids are very young, I have seen many, many family budgets over the years, and can recommend some costs to anticipate and factor into your budget as time goes on.
Childcare: This is often the largest expense related to having kids. Unless you have family in town that is willing and excited to be with your babes whenever you need it (rare), or can afford for one person to stay home full-time with them (also rare), this is something you'll need to plan for. It's a good idea to have conversations ahead of time about how many days you will need someone to watch the kid(s), and what that might realistically cost based on options in your area. Knowing this cost might also influence you to change work schedules, or decide if one or both of you want to go down to working part-time. If staying at home with your child is important to you, I recommend crunching the numbers to see what changes in your life and budget might make this possible.
Supplies: At first this will mostly be diapers and wipes, which Investopedia claims can cost ~$50/mo per child the first year. For one friend of mine who tracked her baby-expenses the first year of life, they were the same as supporting their dog- about $80/month. Obviously this will increase over time:)
Nourishment: Even if you intend to breastfeed, you never know if your baby will also support this decision. For the first year of life it is important to consider the potential costs of donor milk or formula.
Stuff: The process of gathering and purging correctly-sized and age-appropriate items for your kids will be ongoing. Even for those committed to re-using as much as they can, there will of course be items that crop up.
Healthcare costs. Everyone has different health insurance options through their work or the marketplace. While some are comfortable with catastrophic plans, others may be willing to pay for the safest and most comprehensive plan possible. If adding kids to your plan will increase your monthly bill significantly, make sure to keep that in mind.
Food... I see families with kids spend anywhere from $350/month to $3000/month on groceries. Although how busy you are and how much time you have to cook are huge factors in what your grocery costs may be, there are always ways to save and habits to change that can cut your bill.
The extracurriculars: Lessons, sports, and camps. Do you want your kids to go to Music Together classes, cool outdoor summer camps, or play club sports? It's a great idea to make a list of the annual costs related to these experiences and factor them into your monthly budget.
Education: Will you want to save for your kid's college in a 529 plan or other savings vehicle? If so, how much are you planning to put away? Most financial coaches or advisors would recommend prioritizing this only after you've made sure you are fully funding your own retirement needs.