Growing your family shouldn’t mean shrinking your financial goals
Welcoming a bundle of joy is an exciting time—but it also comes with a million and one questions to answer. How are my partner and I splitting parenting duties? Will we sleep train our baby? Will we ever agree on a name?
All are important questions, but consider also the financial questions that arrive along with your little one. The 2015 Expenditures on Children by Families report, released in January 2017 from the United States Department of Agriculture, estimates that it costs parents an average of $233,610 to raise a child to age 18. This not only affects your everyday expenses—diapers and formula can be expensive!—but can also affect your long-term savings goals, such as a retirement fund.
These three approaches will help you address your family’s changing financial needs while remaining on track with your other financial goals:
Prep for post-baby budgeting
A general rule of thumb for expectant and new parents: Prepare early. If you’re already hoarding paint swatches and nursery catalogs, it’s time to start treating your new financial reality with the same level of enthusiasm. Evaluate how your income and expenses will change once the baby comes.
Although there has been an increase in company paternity or second-parent leave policies, maternity leave is still the more common approach for working parents. The majority of company maternity plans are unpaid, so with your income likely stalled for six to eight weeks, it’s important to ramp up savings to pay for for medical, child care, and everyday expenses.
If you’re enrolled in a company-sponsored 401(k) plan, maximize contributions during your pregnancy to make sure you’re getting the highest match from your employer. This is also a good time to re-evaluate your budget, cutting out discretionary expenses to put more money aside for saving or investing.
(Au) pair your planning
Now’s the time to explore a pairing that doesn’t involve onesies and tiny shoes. Your financial plan will go hand in hand with your parenting strategy, and each decision can impact how much money you’re able to set aside for the future.
First, decide with your partner the kind of child care you’re comfortable with. Do you plan to hire a nanny, join a daycare, or will you or your partner consider stay-at-home parenting? While each option comes with its own benefits, each also puts a dent in your wallet.
It’s also important to discuss the types of childhood experiences you want your children to have. Will you plan yearly vacations to Disney World? Will your children be involved in music, sports, or other activities? These choices will also affect your ability to meet long-term saving goals as your children get older.
While these decisions are certainly important, don’t forget to make plans for you! As parents, you want to give your children everything, but it’s important to keep yourselves in mind, too. This is where a financial plan can really help—by establishing a strategy for meeting your goals, you’re setting yourself up for personal and family success.
Call in reinforcements
Just as you’re looking for the right doctor, midwife, or nanny to fit your needs, consider adding a financial expert to this list as a partner in your financial journey. A trusted representative can develop a plan that accounts for both your short- and long-term goals, and can become a valuable resource for advice during life changes like having more kids, buying a new house or changing careers.
Another advantage to seeking out professional advice is that it can help keep your priorities in check. It can be easy to let your dreams and goals take a back seat, but it’s important to maintain a balance.
For example, if you’re struggling to save for both your child’s college fund and retirement, you should focus on your retirement first. There are other ways to fund your children’s education—such as loans and scholarships—but once you retire, you only have what you’ve put aside. A financial representative can recommend the best ways to maximize your retirement savings while still supporting your children’s dreams.
With these tips in mind, you can begin making your finances one less uncertainty—and focus on bringing up baby.
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