How To Plan For The Parenthood Price Tag
In a previous blog, we discussed the cost of raising a child and what it financially entails. As planners, what we’ve found is that preparing for life transitions can help reduce the stress and anxiety that often come from venturing into a new phase of life like becoming a parent. To help those considering expanding their family, here is a list of “other” financial planning considerations that go into welcoming new additions to the home, beyond the added expenses of diapers, child care, and piano lessons :)
- Saving & Budgeting
- This may feel a little basic but having these two fundamentals in place will set you up for success (and less stress) in the future! Make sure you have an emergency reserve (typically 3-6 months’ worth of expenses) or continue working on building cash at the bank to hit your target. Re-evaluate your budget to see if anything has changed, can be reduced, or removed (such as unused subscriptions) so that you can increase your savings.
- Don’t worry if you have more money in the bank than your cash reserve target as this will give you extra flexibility for unexpected costs that pop up with having kids.
- Work Benefits – Health Insurance & Parental Leave
- If you’re thinking about kids in the future, now may be a good time to review your health insurance and the increased cost adding a family member to the policy so you can be proactive in updating your budget. You will want to review your deductible and how much you'll be expected to pay out of pocket for any pregnancy related cost. This will also help you know what you may need to save so it won’t be a hurdle when the bill comes in the future.
- Another detail to look into is your maternity/paternity leave. Check your employer benefits as each company will have different criteria that they cover. This will include if they will pay you during your time off (or a reduced percentage of your salary) or if they follow the guidelines of the Family and Medical Leave Act (FMLA), which allows up to 12 weeks unpaid, job-protected leave. Saving more now may reduce the stress of potentially not earning a paycheck during this time. The focus can then be on enjoying your time off with your bundle of joy!
- Other Options to starting a Family
- If you’re thinking about adopting, using a surrogate, or IVF, consider looking into your employee benefits as your company may help cover some of the costs. This is another area that may require some additional savings so try to put money aside specifically for any bills related to expanding your family.
- Acquiring Life Insurance
- If you don’t have life insurance already, now may be a good time to acquire some since you’ll now be financially responsible for taking care of a child as well. The amount of coverage is situational, but the most common reasons to have life insurance are to cover any debts, replace the income that you were making to continue to support your family in the case of a premature passing.
- Establishing/Updating Estate Documents
- Similar to life insurance, you will want to make sure your family is taken care of and your wishes are documented should something happen to you. Once children come into the picture, make sure to update any beneficiaries listed on financial accounts and in your will or consider even updating the language to create a trust due to having minor children so you can control what it is used for after you’re gone. Reach out to an estate attorney as they’ll be able to help you navigate what the best option is for your situation.
- Trying to Prioritize Competing Goals
- This comes after you get the hang of being a parent! You may be struggling on where to save (for now, for retirement, for your child’s future, etc). As life gets more complicated, consider reaching out to a CFP® as they’ll help you navigate your competing goals and the best way to reach them.
Starting this new chapter in your life is extremely exciting but also can come with some uncertainty too. That’s okay though as it’s normal! Take a deep breath and feel free to reach out if you want some guidance if you’re on the right track financially for your family and your goals.
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