Paging Rosie: The Finances of Parenting
I know it goes without saying that having a baby certainly creates change in a couple’s lives. One of the most major changes is also one of the least comfortable to discuss: how you spend and save money, or your finances. It is estimated that the average cost to raise a child from zero to 1
8 is just over $225,000 (with obvious variations depending on geographic and social situation).
Yes, that seems like a HUGE amount of money, but it also represents a huge number of decisions to be made by you and your partner. And we all know that when decisions have to be made within a couple, conflict can arise. Not to mention that talking about money can often be difficult in itself. Add on top the emotion of your love for your child, and you have the potential for some explosive discussions.
When you are having these financial discussions (both regarding how many children you are going to have and in how you are going to spend your money while raising them) try to keep as cool and calm as possible. However much you may disagree, remember that you both have your child’s best interest at heart and it is important to figure these things out.
Try to see these discussions as exciting opportunities – you are, after all, setting the framework for the examples you will be setting your children and putting in place the structure to being more secure and making better financial decisions. This could in fact bring you and your partner closer together if you can come to agreement. Even if you don’t have a partner these are still issues you are going to have to address internally and come up with a game plan. Don’t wait until you’ve had your baby before you have the financial dialogue.
Whether alone or with your partner, these are some of the things you are going to want to cover:
- Health Insurance: Does your current health insurance policy provide good prenatal, postpartum and family coverage? If you have had problems in the past, does your current insurance cover fertility treatment?
- Leave: Do you get maternity leave? Is it paid or unpaid and for how long is it? Does your partner get paternity leave?
- Working vs. Staying at Home: Will both members of the couple continue to work? Or will one stop working to stay at home with the baby? This is often not only a financial decision but an emotional one as well. It is also a very big question because, while staying home may be very attractive in the near term, what happens if the stay-at-home partner wants to return to the workforce after staying home for a number of years, perhaps once the children are at school?
- Childcare: Who will care for the child? Will you use a day care, a nanny or will someone become a stay at home parent?
- Products: How many extra products does your baby need? Perhaps this may require sacrificing some of the pre-baby luxuries such as eating out, going on vacation, in order to afford diapers, formula, clothes etc. This type of decision will obviously have a very big impact on your relationship as some of the couple quality time can be take away and you might have to get more creative.
- Schools and Education: Do you plan to send your children to public or private schools? Do you live in an area that makes your choice possible? It is also not too early to think about college and what you might be able to do to help your child should they decide to go.
- Your Home: Is there space for your new arrival? If there isn’t but you can’t afford to move then you need to get creative and figure out how to move things around to accommodate the new member of your family. If you do plan to move be realistic about what they will cost and when is a good time to do so.
- Life Insurance, a Will and Guardianship: While no one wants to think about unfortunate events, this is another important step in planning for your child. There needs to be a clear plan for what happens if the unspeakable occurs and how your child will be cared for if something happens to both parents. This is critical planning for your child’s future and is a step that shouldn’t be forgotten.
Overall, remember there is a person coming into your life for which you are entirely responsible. It is imperative that you figure out how you are going to give them the best life possible and educate them about financial responsibility. You are their greatest role model so make smart plans and smart choices. As daunting as it may seem, I have full faith that you can do it!