When is the Best Financial Moment to Start a Family?

Is there ever a perfect time, financially, to plan for a baby? Having experienced an unexpected pregnancy, I’ve pondered this question a lot, and I know many others have too. Raising a child when financial stability is lacking can be tough. Even when your finances improve, the thought of having another child while keeping other financial goals in check can still feel overwhelming.

Raising a child is expensive, and ideally, you’d want to have your finances in order before deciding to have a baby. Financial readiness is a top priority in planning for a child. From a financial perspective, it might never seem like the perfect moment to add to your family. That’s why preparation is key; you need to brace yourself for higher expenses and possibly increased earnings.

Let’s explore some crucial financial aspects to consider before expanding your family.

**Savings Situation:**

Reports estimate that raising a child from birth to the age of 18 may cost around $233,610. Whether or not you agree with this figure, it’s clear that you’ll need a significant amount of savings to manage these costs. You might start saving for college tuition, but don’t forget to build up your emergency fund, as unexpected expenses tend to increase with a growing family.

Before kids, you might have been fine with savings to cover three months of expenses. However, with a child, it’s wise to have savings to cover 6-12 months of expenses. Establishing a dedicated “baby fund” can help manage everyday baby expenses like clothing, food, and supplies in their early months.

Being well-prepared with extra savings can help keep you out of debt and avoid the need to borrow for your child’s needs. Don’t forget to think about your retirement plans too. Having a child shouldn’t prevent you from retiring on time, so it’s beneficial if you’re in a position to save more before becoming a parent.

**Medical Bills:**

New parents often don’t anticipate the medical bills associated with pregnancy and birth. There will be regular doctor visits, checkups, and tests. Then, there’s the cost of delivery itself. According to a study by the University of California, as mentioned by NerdWallet, a simple vaginal delivery can range from $3,296 to $37,227 depending on the hospital, while Cesarean sections can cost between $8,312 and nearly $71,000.

Given these potential costs, having a good health insurance plan can minimize out-of-pocket expenses. It’s crucial to have insurance with access to in-network doctors, but also to prepare for costs the insurance might not cover.

**Stable Housing and Transportation:**

While owning a house isn’t necessary to have a baby, stable and sufficient housing is important. Babies need space for their gear, and as they grow, they’ll need even more room.

If you’re planning to buy a home, make sure it fits within your budget and that you can move in before the baby arrives. A 20% down payment can help you avoid costly private mortgage insurance. When it comes to transportation, make sure you can afford regular doctor visits and vaccinations during the first year. While having a car isn’t mandatory, it helps secure a car seat safely. You might also need a larger or safer car.

**Childcare:**

Figuring out who will care for your child can be stressful if both partners need to work. Childcare centers can be a primary option if family or friends are unavailable, but they can be pricey, especially for infants. According to Baby Center, the average cost of center-based daycare in the US is $11,666 annually ($972 a month), but this can range from $3,582 to $18,773 a year ($300 to $1,564 monthly). These expenses can quickly surpass your monthly grocery, rent, or mortgage costs, creating financial stress.

State-funded daycare programs might help reduce costs but are usually income-based. If your income is above the limit, you’ll need to budget these expenses yourself.

Your baby can start childcare as young as six weeks, but some parents choose to extend maternity leave to avoid this. If you go this route, plan your work and income accordingly.

If you’d prefer to stay home with your child, transitioning to a single-income household requires discussions with your partner to make sure it’s financially doable. Consider options like boosting savings, securing a raise, cutting expenses, or finding a flexible part-time job to maintain a healthy financial balance.

**Summary:**

Having a baby often means increased expenses and budget challenges. The key is to prepare your finances well beforehand. Ideally, you should be financially stable and ready to take on this responsibility when planning to start a family.