Children and Money
Having a child is
a major event in your family and for your finances. As you prepare for
being a parent, be sure to consider the financial impact that a child
will have. The additional costs of buying diapers and baby food may not
seem too significant, but just wait. In 2013, the US Department of Agriculture
estimated that the cost of raising a child from birth to age 18 was over
$241,000, and that did not include the costs of college. Luckily, the
costs in early years are lower giving you time to build the costs into
your financial plans.
Issues to consider
- Build some financial
reserves before the birth. Nature gives you and your baby nine months
to prepare for the birth. Once you know you are going to have a baby,
make sure to save some additional money. It will be easier to cover
those diaper costs if you do not have to worry about having money available.
Some extra money in a savings account will help reduce the stress of
this exciting time.
- Check your medical
insurance. If you do not have medical insurance, buy a policy before
you become pregnant. Some policies require three or months of coverage
before the start of your pregnancy. Other policies limit the amount
they will pay, so be sure to check the terms of your policy.
- Check your
employee benefits. Many companies have provisions for paid leaves
for pregnancies for both the mother and the father. You may even be
able to combine vacation pay, disability pay and sick days to maintain
your income for a few extra weeks before returning to work.
- Review your
life insurance coverage. You are going to have an additional person
in your family that is dependent on your income. If you do not have
life insurance, now is a good time to get it. If you have coverage,
consider increasing it to recognize the additional financial responsibility
you will have. Many companies offer inexpensive life insurance coverage
as part of their employee benefit program and there are inexpensive
term policies available from many life insurance companies that you
may want to explore.
- Talk to your
employer. Be sure to know your employer's maternity leave policy
and talk with your supervisor so the appropriate planning can be done.
- Write or revise
your will. Even if you do not have substantial assets, a will is
necessary at this time. The will can designate guardians in case you
and your spouse are unable to take care of the child. You should also
use this time to create a power of attorney for health care issues.
This document will spell out the type of care you will receive in case
you and your spouse are unable to make those decisions.
- Consider how
you are going to handle child care. If you plan to stay home with
the child and not return to work, you will have less income. If you
plan to use a day care center, it will cost money. In either case, investigate
your options and do some financial planning before the delivery of your
- Start saving
for college. College is expensive and the sooner you start saving,
the easier it will be. Once the child is born, you may want to apply
for a Social Security number and open a savings account for the child.
It can be a convenient place to transfer some money and if you make
your family and friends aware that the baby has an account, maybe you
will get gifts of money instead of another picture frame or baby outfit
you do not really need.