Starting a family changes every aspect of your life, particularly your finances. When it comes to family planning, financial planning should be a significant part of the equation, whether you are thinking about starting a family or already have a baby on the way.
The cost of raising a child born in 2015 to age 17, according to the U.S. Department of Agriculture, is $233,610 for a middle-income family—not including the cost of college. One of the first things you should do when planning a family is evaluate how your children will impact your day-to-day finances and retirement planning.
While it’s easy to get swamped by baby planning—everything from cribs and car seats to diapers, baby clothes, and countless other items—there are other critical areas to focus on, such as health insurance. Review your current health insurance coverage, including the cost of adding a new dependent, and compare it to your partner’s coverage (if applicable). Also, understand what coverage your healthcare provides for your child’s birth.
Life insurance is another essential consideration. Ensure your child will be cared for if something happens to you or your partner. Additionally, have a will in place and determine who will care for your child if anything were to happen to both you and your partner.
Daycare is another significant factor. According to Care.com, the average weekly cost of childcare for a single infant in the U.S. was $211 in 2019, or $596 for a nanny. Depending on your location, childcare could cost significantly more. Evaluate whether it might make financial sense for one parent to stop working instead of paying for childcare, particularly when multiple children are involved.
These are a few factors to consider when creating your family financial plan. You may want to hire a financial advisor to assist with your personal finance planning. Additionally, build an emergency savings fund to cover unexpected issues, such as job loss or serious illness. Financial advisors typically recommend saving at least six months of living expenses to give yourself time to recover from such events—something even more crucial when you have a child depending on you.
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