Get These Finances In Order Before Having Kids
I had this odd/sad/frustrating experience the other day. I was out for a jog and, honestly, worrying about my finances. I’m unmarried and without children. I’m a renter. My biggest concern right now is just paying for my own basic expenses, and putting something aside each month for retirement, and for emergencies. I manage to do that fairly well, but even still, I’m not in that true financial sweet spot where you know that almost not emergency could shake you. At any given moment, a small disaster could financially wipe me out. As such, I feel light years away from being ready to have children. And as I was on this jog, thinking about this, I passed a bus stop where I saw a woman who had a baby in a stroller, a toddler on her lap, and a very pregnant belly. She had two kids, one on the way, and was waiting for the bus. I manage to lease a car, and I do not think I should have kids right now. This young mom has to ride the bus, and is making baby number three. It really got me thinking about how rare it is that we really educate young people on what it costs to have a family, and what to prepare for. For the sake of yourself and your precious future babies, get these finances in order before having kids.
Put aside 5K a year for retirement
Maybe at the moment you’re saving for retirement, and that is good. But will that go away if you have a kid? If you’re still in a place where you have to choose between either saving for retirement or funding a kid’s life, it’s not time to have kids. You should always be putting money aside for retirement.
Build your emergency savings
If your emergency savings are looking a little sad, then how are you supposed to pay for a kid’s emergency? Of which there could be many. Like if your kid gets sick and you need to hire a nanny for a week while your kid stays home from school and you work. Or if your child has a medical emergency and you need to pay the $2,000 insurance deductible.
Have enough to start a college fund
Though you may not have hopes of ever fully paying for your child’s college in cash one day (that’s pretty hard for even wealthy individuals), putting aside at least some money for your child’s college can help you greatly. The more you can put down when the day comes, the smaller the student loans can be.
Have a housing plan
Maybe for now, you’re okay living in a one-bedroom apartment with a baby. But one day that baby will become a big kid who wants her own room, and you’ll want privacy. Do you have a financial plan for getting a larger space?
Or at least home stability
Make sure your housing situation is stable. If you live in a place where the rent has gone up every year for the last five years, the odds are it will continue to do so, and you’ll get priced out. If you live in a rent-controlled building, make sure there haven’t been offers on the building, since a developer may swoop in, and kick you out.
Figure out transportation
If at all possible, don’t have children without at least one vehicle in the family. In today’s society, you don’t want to make your kids take public transportation alone. But more importantly, between the after school activities and play dates and class start times, they cannot be reliant on sluggish public transport. And if an emergency comes up at the school, you need to get there—fast. Or if your child needs to go to Urgent Care, you can’t afford to wait for Lyft or Uber, or take the bus.
Five years of daycare
Remember that kids don’t enter preschool until age three, and even then, preschool may only be a few days a week, and it isn’t full days. You need someone to watch your kids for the first three years of their lives, 24/7, seven days a week. And even when they’re in school full-time, they’re off at 3pm and you may not be off work until 5pm. Expect to pay anywhere from $500 to $2,000 a month on childcare, for at least a decade, on either occasional nannies or full-time care.
Have a kid’s health insurance plan
Know what sort of health care plans are available for kids in your state. Do you have to pay for some of them? How much will that cost you? Can you afford to supplement for a really good plan?
Have good insurance for yourself
If something happens to you, every day that you are not well is a day you need to hire help. Even if you have a partner, he probably has to work, too. If you’re on bed rest after a surgery, you’ll need to hire help. Make sure you have good health insurance for yourself, so you can take care of yourself and get better as quickly as possible.
Increase your earning potential
Maybe, right now, earning what you earn, you could pay for a baby, and still put money aside for retirement and emergencies. But kids get more expensive as they get older. Their school supplies become more expensive. They need things like tutors and cars. Are you in a position to earn more as the years go on? If your earnings are limited due to your current education or skillset, it would be a good idea to change that, before having kids.
Pay off your debts
Debts are crippling. Having debt makes it very hard to save money. And since, as we discussed, children’s expenses only go up as they get older, your debts could eventually make the difference between you putting away something each month…and putting away nothing.
Prepare for unpaid maternity leave
If your company doesn’t pay for maternity leave, then you are losing money every day you take maternity leave. Meanwhile, you’re spending more on diapers and formula and all of the other things babies need. Do you have a few months of savings backed up for that time?
Or just extra maternity leave
Maybe your company offers some paid maternity leave, but not enough. The US isn’t always great about maternity leave, and doesn’t offer nearly enough for a mother to be ready to go back to work. If you’ll need to request more, but it won’t be paid, be financially prepared for that.
Find career stability
Though career stability is a luxury that I understand isn’t afforded to everyone, perhaps it’s a luxury worth waiting for, before having children. Though you may be able to scrape by for yourself during periods of unemployment, saying no to your child’s needs simply isn’t an option.
Or have a backup revenue stream
If your lifestyle won’t really ever come with career stability, it could be time to find a backup stream of revenue. Perhaps you can rent out one of your bedrooms or drive for Lyft/Uber. Determine some way you could always bring in cash, even if your main job fell through.