Choosing to bring children into your life is an enormous decision, both emotionally and financially. While your heart and mind may be eager to jump ahead and focus on the anticipated joys of new parenthood, you’ll still need to spend time preparing financially before having children. Consider these three areas of financial planning and preparedness to help you make sure that you’re financially ready for your new arrival and that your growing family is protected — now and in the future.
1. Maintain Adequate Life Insurance
It’s hard to imagine that you may not be around to provide for your family in the future, due to unforeseen incidents. Before having children, take some time to plot out how much money it may cost to raise your family if you’re not there. While you may have access to company-sponsored life insurance, it may not be enough to cover those expenses. That’s why investing in personal life insurance is a must before having children. A recent Bankrate.com survey shows that about one in three parents has no life insurance at all, and a third of those who do have insurance have no more than $100,000 in coverage. While a hundred grand is a lot of money, investing in an even higher amount can better protect your family in the future.
2. Save Money for Expected and Unexpected Expenses
You may already have some discretionary funds set aside to deal with life’s little surprises. After your little ones come along, however, your rainy day savings may be inadequate to cover the new expenses you face. Parenting website The Bump worked with financial professionals to create a realistic forecast of expenses. Here’s how they add up:
- Supplies like formula, nursing aids, nursery and baby gear, and clothing and diapers can add up to a whopping $6,500 to $9,000 — just for the baby’s first few years of life.
- Maternity leave, child care, health insurance, legal documents and life insurance can add up to an additional $25,000.
Calculating how much money you’ll need and assessing how much you have will enable you to set accurate savings goals.
3. Re-Examine Your Living Arrangements
Did you choose your current home based on the future needs of your family, or because it was the right setup for your current lifestyle? Have you been paying a premium to rent a swanky apartment in the heart of the city? Did you max out your budget on a big, fancy townhouse when you were younger? If you have more space than you need, or you’re spending too much on rent or utilities and maintenance for space you’re not using, consider finding a more economical space, and put the money you’re saving toward baby expenses.
These questions can help you to make the best housing decisions for your growing family:
- Can you imagine your home’s various spaces filled with baby gear?
- Do you have a room for a nursery?
- Is your table big enough to accommodate a high chair?
- Do you have closet space to store supplies?
- If you have a multilevel home, are you prepared to make numerous trips up and down the stairs as your baby needs your attention?
- Is your car ready for the addition of car seats? Will a stroller fit in your trunk?
When you look around you with an honest eye, can you picture a baby within your current space? What about a toddler, a preschooler, or an adolescent? If not, now is the time to upgrade your living arrangements. For example, if you need to make the move from renting an apartment to owning a house, keep in mind that you’ll have to make a down payment and that you’ll suddenly be responsible for all utilities, repairs and maintenance.
Bringing Baby Home
Once you invest in a proper amount of life insurance, save money for large future costs and commit to lifestyle changes as necessary, you can relax — but only for a moment! You’ll hardly remember your life before having children when you find yourself in the constant whirlwind of love and devotion that you’ll experience as a new parent.