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Starting a family is an exciting time in your life and is something that many people want to do.
But and often overlooked part of the equation is your finances.
Your financial situation plays a major role in whether or not you can welcome a child into the world responsibly.
If you’re thinking of having a child but are wondering, “am I financially ready for a baby?”, here are the most important things to think about.
Going through this list will help you better determine whether or not now is the right time.
Table of Contents
Am I Financially Ready For A Baby?
#1. Can You Pay For The Items You Need During Pregnancy?
Many expectant parents get so caught up in the moment when it comes to having a child that they overlook the cost of pregnancy.
They also underestimate the cost of the things they need before their child even arrives in the world.
For example, during pregnancy, there are a lot of doctor’s appointments you need to go to, especially as the pregnancy progresses.
If anything comes up during these visits, like gestational diabetes or preeclampsia, you may need to have more visits and even take significant time off work.
Of course, food spending could also rise during this time as you want to be providing a healthy head start to life.
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And then we get to the baby gear you need.
Diapers, clothing, car seats, a bassinet, and more are all baby expenses you will have even before the baby arrives.
You need to make sure you have the money to be able to pay for these big-ticket baby items as they can quickly add up.
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#2. Do You Have The Money To Afford Your Child’s Expenses?
The expenses you have during your baby’s first year can easily break any good budget.
In fact, the average cost of the first year is between $20,000 and $50,000 according to studies.
This does take into account the cost of delivery which many parents won’t pay thanks to their medical insurance.
But the fact remains that it still is expensive to have a baby and buy all the baby-related items you need.
And I’m not just talking one off expenses like a crib, car seat, etc.
You have diapers, baby food, toys, clothing, and more.
These expenses need to be added into your monthly budget.
In fact, you might want to sit down and create a detailed baby budget that covers all the expenses you expect to have.
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While you can save some money by making your own baby food and using cloth diapers, you will not be able to eliminate all of the baby costs you face.
If you’re already having trouble making ends meet, chances are that now is not the right time to have a child.
Of course, you could decide to pick up a side hustle before the baby comes.
The extra cash you earn could help you meet your monthly expenses once the baby comes.
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The only downside to this plan is chances are you might not be able to keep working the side gig once the baby comes.
So make sure you set aside money you make so you have it once the baby comes.
#3. Have You Reviewed Your Health Insurance Plan?
Up until now, health insurance has been fairly straightforward.
You either have coverage just for you or you and your partner.
But now you will be adding a child into the mix.
Chances are you will need to change your coverage, which you can do anytime you have a major life event.
And this change will increase the monthly insurance premium you pay.
While you are doing this, you want to understand what your insurance provider will cover when it comes to hospital bills and the delivery.
You also need to know what medical costs will be covered after the baby arrives.
For example, are well visits to see the pediatrician covered 100% or will you have to make co-payments?
Getting the right medical plan can save you a lot of money, so make sure you take the time to fully review every aspect of it.
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#4. Do You Have The Space For A Growing Family?
With the excitement of a newborn, logistics are usually not something considered often.
Take for example you living space.
Maybe you’re currently living in a cramped studio apartment.
You know that you won’t have enough money to sign a lease for a two-bedroom apartment.
What do you do?
While right now, as the child is a newborn, it is easier to make it work if you don’t have enough living space.
But as they grow, this isn’t the case.
The point is, you need to consider your living arrangements and be able to afford to move to a bigger house or apartment as your child and your family grows.
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Finally, don’t make the mistake thinking that you can address this later on either.
You have additional expenses with kids, so more of your money will be budgeted for monthly expenses.
It is best to think about and plan for this now, when you have the available cash and resources.
#5. Do You Have Emergency Savings?
When asking the question, “am I financially ready for a baby?”, most people only think about their income.
However, your savings are just as important.
For example, what happens if you lose your job?
This undoubtedly would leave many new parents with a lot of stress as they navigate the birth of their child.
Ask yourself, if something were to happen right now that impacted your income or ability to make money, would you be able to cope with it?
More importantly, would you be able to provide for your child using these savings while you look for a new opportunity?
If the answer to either of these questions is no, it’s important that you focus on improving your financial stability to the point where an unexpected life development won’t make it impossible to support yourself and your child.
Make it a point to start building your emergency fund.
The good news is you can build one quickly, in as little as 6 months even.
Having the cash on hand in case you need it to cover any unexpected expenses will go a long way in helping to keep your stress levels down.
It will also give you the peace of mind knowing that should you lose your job, you still have money to pay for the things you need.
#6. What Do Your Employer Benefits Say For Maternity Leave?
Not every employer will offer you the time off that you deserve when you have your first child.
Understand that the Family Medical Leave Act (FMLA) does protect your job so you can take off 12 weeks.
But it does not guarantee you are paid, and it only covers eligible employees of covered employers.
Before a child is considered, take some time to evaluate the guidelines surrounding parental leave with your company and whether or not your employer offers it.
If they do, consider how much time off you will receive and whether or not that will be sufficient when you do have your child.
Also make sure you understand how you are paid.
With some employers, you need to use up any available vacation days first before the company pays you.
If there are no parent leave opportunities in place, consider whether or not you will be able to take paid time off, and how much of it you can take when your child does come.
You can also ask your employer about remote work opportunities to see if you can spend more time at home in the position that you’re already in.
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Both partners should look into their benefits.
More companies are now offering paternity leave to fathers.
And if you can work it out, you might want to stagger the time off.
For example, maybe you both take the first week off and then the father goes back to work.
When the maternity leaves ends and she needs to go back to work, the father can start paternity leave.
This can allow you to delay needing child care, which can save you thousands of dollars.
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If you’re self-employed, the question becomes whether or not you can provide for yourself while you’re taking time to spend with your new child.
The good news is that you can work from the comfort of your home while you’re caring for your baby.
However, this can still cause a great deal of stress as you go back and forth between the two.
This is something that all freelancers or business owners should take into account.
Finally, in some cases, you may not be able to take advantage of what your employer offers.
In this case, it’s best to wait for family planning until you have a steady job with an employer that understands the need for time off that you deserve to spend with your new baby.
Although finding these types of opportunities can be hard, you shouldn’t settle for less and find yourself having to seek out a new job while simultaneously caring for your child.
#7. What Does Childcare Look Like And Cost?
The average cost of childcare averages around $8,500 annually per child.
Childcare either costs you time or money.
If you’re lucky enough to be in a partnership where one income can cover both of your needs, your partner can stay home and look after your child while you work full-time.
However, this isn’t the case for many of today’s parents.
Many adults find themselves working along with their partners to pay for rent and living expenses.
Some adults may even work multiple jobs to make this happen.
If this applies to you, you need to find another way to make sure that your child is being supervised when the two of you are at work.
The best alternative is to enlist the help of family members, like grandparents who would love to watch your child while you’re at work.
If they’re consistently available, you can establish a regular schedule where they come over or you drop your child off so that you know they’re being properly cared for during the workday.
If this isn’t possible or if there are gaps in the schedule where you need to find other support, you should look into childcare options in your area.
The two other options you have are daycare and hiring a nanny.
Both will cost you a considerable amount of money.
At the end of the day, you have to determine which option you are most comfortable with.
#8. Can You Provide Them With A Stable Life And Environment?
If you don’t have your finances together, it can be really hard to provide your child with the life that they deserve.
Another thing you may not have considered up to this point is your credit.
If you have a poor credit score, getting a new vehicle to fit your growing family, moving to a new residence, and doing all of the things that are required of you as a parent becomes substantially more difficult and costly.
Finally, parents need to think about how much they can invest in their children to provide them with an upbringing that they themselves may not have received.
If you are currently in a situation where you can’t offer the stability, space, or other things that a child needs to grow up happy and healthy, it’s going to become much harder to be the parent you want to be.
As your child grows up, you may find yourself consistently behind in your financial life and beyond.
#9. Can You Afford The Additional Insurance Coverage?
Already discussed was the added cost of a new health insurance plan.
But this isn’t the only insurance policy you need to consider.
Now that you have a child, you have someone dependent on your income.
So getting term life insurance becomes a requirement.
The same is true for disability insurance as well.
Both of these will increase your monthly expenses, requiring you to either earn more income, or cut back in other areas if money is already tight.
Related to all of the above too is estate planning.
Do you have a will set up so if you should pass away prematurely, there is someone who will raise your child?
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What about setting up a power of attorney for your medical care and finances?
While these things won’t be an ongoing cost, they will cost you money to set up.
#10. Where Do You Stand With Your Financial Goals?
You might think you can cover the new expenses you will incur by cutting back on saving for retirement or other goals you have.
In the moment, this sounds like a great idea.
But the truth is, you are hurting both yourself and your child.
When you stop contributing to your retirement fund, you ensure you won’t be able to afford retirement.
Not only will you not enjoy your golden years, but you will become a burden on your adult child, both emotionally and financially.
It is important you continue to work on reaching financial success even with a child so you can enjoy life more.
#11. Are You Prepared Mentally And Emotionally?
Up until now, we’ve been discussing the financial side of having a child.
But there is another area that needs to be considered, in addition to your financial stability.
This is, are you ready for the major lifestyle changes that having a child brings, both mentally and physically?
A child will take up a lot of your time, so you won’t be able to enjoy weekends out and late nights partying with friends.
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You have a human being who is relying on you to provide for them, and you can’t do that if you are more interested in yourself and your hobbies.
This isn’t to say you don’t get to have any fun in life.
But it is saying you will need to make a major change to how you have been living life, child free.
There are the things to consider if you are wondering ‘am I ready for a baby’?
If you find that your financial life just doesn’t support a child right now, don’t give up hope.
This doesn’t mean you can never have children.
It just means that you need to be responsible for improving your finances first.
Then you can focus on having a baby.
The last thing you want to do is have a child and not be able to provide for them like you want to.
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I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.