While the cost of having children can be a deciding factor in your decision to have a family, there are costs associated with planning for a child before their arrival. In addition, there are long-term costs associated with children. You don’t have to have it all figured out when you start planning for the increased expenses of your growing household. What you need to do is understand your current financial situation and make as much as possible as flexible as possible so that you can handle the changes that will likely occur as your family grows. Once you have a solid plan in place, you can focus on what matters most to you and your growing family instead of stressing about money.
Understanding How Your Household Expenses May Change
When planning for your growing family, it is wise to first determine where your money is going and then make the necessary cuts in your non-essential spending. By getting a grip on your household’s current spending, you can have a better idea of where your money will be spent as you are adding more members to your family. Don’t think that cutting back on non-essential spending will have to mean that you cut out all fun money. Instead, you can find ways to cut back on non-essential spending to give yourself some breathing room in your budget as you are adding more expenses to your household.
People immediately think of the costs of the pregnancy and then the arrival of the new baby. Diapers, the cost of baby clothes, and all of the various items of nursery furniture have to be bought and can cost a lot when all are needed at the same time. However, once the new baby has arrived, a huge number of additional expenses arise very quickly.
The nursery and toys to fill it for a short time are a small portion of the ongoing costs for your child’s growth and activities that will increase as your child gets older. When your child is an infant, you spend money on items like diapers, formula, and baby supplies. Later, as your child gets older, the baby food and then child food will increase. Other ongoing costs for your child will include food, healthcare, a car for your child and his/her insurance, and child care. Other things for your child’s activities such as school supplies, technology, and activities to take while traveling to sports. And then there are the increased medical costs for your child as your child gets older too. Depending on the child, as they get older, one parent may end up working fewer hours or leaving their employment entirely to care for the child.
Planning for Childcare
Childcare can be one of the biggest expenses for many families with children, and in some cases the monthly cost of childcare could be equal to or even greater than the mortgage or rent repayment for the family’s home. This cost can really put a squeeze on a family’s finances, so it is worth researching childcare options before having children and choosing the best fit for your family.
Explore several different child care options, including child care centers, in-home child care, family child care, and family and friends who can provide child care assistance. Each type of child care has advantages and disadvantages, and can have several different financial and practical trade-offs. For example, while center child care may cost less than in-home child care, it may require a longer commute to and from work. While a provider in your home may cost more than a child care center, it can provide the most convenient and flexible child care option. Consider the following when looking for child care: Does the provider show up on time? What are the hours of operation? How far is the child care from your home and from work? What are the costs of child care before and after taxes?
Building Savings for the Unexpected
An emergency fund for a growing family is extremely important to have because there are now more people who depend on your income. Even when you have the best laid plans, things can go wrong. A car can break down, a pipe can leak in your home, you can lose your job, or you may need to pay for a medical procedure or other things that will require money to fix. It is wise to have some money set aside for such emergencies as well as building up long-term savings to cover several months of your typical monthly expenses. Along with maintaining an emergency fund, parents should also consider creating a baby savings fund to prepare for future education, healthcare, and other long-term expenses.
Making savings for the unexpected a habit can be achieved by setting up regular transfers to a separate account. It doesn’t have to be a lot each time, but adding up the small amounts can really help to pay for those unexpected costs. And by keeping your emergency savings in a separate account from your checking account, you will avoid temptation to use it for non-essential spending.
Using Credit Score Checks as a Planning Tool
Credit health can play a role in several major family decisions. Parents may eventually apply for a mortgage, finance a dependable vehicle, use a loan for home improvements, or seek other forms of credit.
A regular credit score check can help families understand how lenders may view their financial profile before they submit an application. Reviewing your credit ahead of time may reveal reporting errors, high balances, missed payments, or other issues that could affect borrowing terms.
This information can be especially useful because it gives families time to make improvements. Paying bills on time, lowering credit card balances, and avoiding unnecessary applications may help strengthen a credit profile over time.
A credit score check is not only useful when you are ready to borrow. It can also serve as a general measure of financial progress. By reviewing your credit periodically, you may be better prepared for future milestones and less likely to encounter unexpected problems during an important purchase.
Preparing for Major Family Milestones
Just as more children mean more space in your home, so too will your vehicle(s) and parents' home(s) likely need to increase in size as well. Don’t just lock into the purchase price of the new home or vehicle; be sure to factor in all of the financial implications.
When calculating the true cost of a home, consider more than just the monthly payment of the mortgage. Property taxes, a homeowner’s insurance policy, utilities, repairs, maintenance, etc. all have to be factored in. Some homes are part of a homeowners association, and there are usually monthly or annual fees for exterior maintenance and/or use of amenities such as a pool or fitness center. As the size of a home increases, so does the amount of furniture that is needed to fill the additional square footage. In addition, a larger home typically requires a bigger heating and cooling system to maintain comfort. And, as with any item that requires repair, the cost to fix a problem with a system in a larger home is typically greater than the cost to repair the same type of system in a smaller home.
Similarly, when considering your family’s vehicles, you’ll probably find that you need a different car than you had before having children. Maybe you need a car with more space for passengers or with more storage space. Perhaps you want to look for a car with extra safety features. But when considering car loans or leasing, you have to consider more than just the monthly payment of the car. In your financial calculations, you must also include the cost of insurance, gas, repairs, registration, and other expenses for your car.
Protecting Your Family’s Financial Future
Insurance and long-term financial planning can be very important in protecting the financial future of your family. As your family changes, review your current health, life, disability, home and auto insurance. Your long-term financial goals may change as your family changes. For example, saving for your children’s education may become as important or more important than saving for your own retirement. It is therefore very important to have a financial plan in place that is flexible enough to grow with your family.
In addition to saving for your children’s future, it is essential that you also save for your own retirement. While there are often loans and other types of financial assistance available to families to help pay for to pay for a child’s education, there is little or no such financial assistance available for retirement savings. Families must rely on their own personal savings as well as on any benefits their employer(s) offer to fund their retirement.
Creating a Plan That Grows With Your Family
In addition to your growing family bringing new expenses, your finances will also change as your children grow up, your career develops, and your new priorities require more money. So your budget, which is working now, will probably need to be changed again next year.
The budget you have in place to spend your money right now will not be relevant a year from now when your children will be at a different stage of development. Your spending, savings, insurance, debt, and credit will all need to be reviewed to ensure they continue to work for you and meet your goals.
If you are unsure where to begin, learning how to start a savings fund for your child can help you build a solid financial foundation from an early stage.
It is impossible to predict every unexpected occurrence, but by planning for known occurrences and putting aside money for emergencies, monitoring your credit and making wise borrowing decisions, you can eliminate a great deal of stress as your children and parents grow and change.
