Few moments are as life-changing as becoming a parent. For many expecting families, the news of the arrival of a child can lead to a conversation that goes well beyond ordering take-out or cooking dinner. It may be one of the first joint decisions about your economic future and how to plan for your short and long term finances as a family.
Look Forward to Changing More Than Diapers
The decision to have a child involves, among other things, thinking about the roles that you will assume at home. An important first step is reviewing your current employment benefits, paid family leave, other and necessary steps to take in preparation for having a child. It’s also an opportunity to have candid conversations with your partner regarding long-term career goals and around how your lifestyle is tied to those goals. Even for couples who have spent years planning to have children, there are plenty of adjustments to your daily habits you’ll have to keep in mind.
Joint Responsibilities and Actions
Each time your family expands, your entire financial plan and long-term financial goals must shift to align with your new family structure. For example, building an emergency fund an essential financial step to take when building a family. Some experts suggest creating a joint account in which wages are saved to meet the joint expenses of the family. Considering the cost of child-care may also help you develop a more holistic understanding of the time and money you’ll be spending and how to save ahead of it.
Is Your Home Suitable for A Family?
Many soon-to-be parents suddenly find themselves looking around their home and realizing it may not fit the needs of a growing family. Be it a backyard for your children to play in or a spacious enough space that can transition from a nursery room to a teenager’s bedroom, becoming a parent also means giving more thought to the ideal home for raising your children. If you’ve always dreamt about a wall with tick marks tracking your child’s height year-by-year, investing in the home in which your kids will grow up often requires long-term planning and a mortgage.
Taxes My Work Out for Your Advantage
Check-in with your fiduciary financial advisor and/or CPA to review the various tax benefits and options that come with expanding your family. A professional can help you take advantage of different tax deductions you might be able to obtain, including, for example, the Child Tax Credit or Child and Dependent Care Credit. Every important decision must be tailored to the needs and possibilities of your joint earnings.
Planning for the Future
If you have decided to have a child, higher education isn’t the only savings goal you should now keep in mind. On the aggregate, U.S parents with babies and toddlers are spending over $42 billion for early education and child care, such as preschool! An average American family spends around $500 a month just for their child’s early education.
In some cases, these expenses can rise to $11,000 per year. In some cases, hiring a full-time nanny or sending your child to daycare could be as expensive (or more) than the after-tax salary of you or your partner. If that is the case, it’s important to have “the talk” with your partner about the trade-offs between the two of you remaining in the workforce versus one of you being the day caregiver yourself. In addition, when creating your financial plan with your financial advisor, consider the educational and developmental activities you want your child to enjoy. If you’re hoping for a violin prodigy or a soccer sensation, factor in costs related to classes, coaches, and equipment investments you’ll have to make in the short and long-term.
Financial Well-Being Will Let You Enjoy This New Life
Starting a family is one of the most stressful, yet one of the most beautiful moments in life. To best prepare for growing your family, be sure to create a structured financial plan in which you have outlined your goals and ideal lifestyle. Doing so will allow you to enjoy the pregnancy period and the arrival of a new bundle of joy into your family.
Disclosure: This blog is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.
Ready to Get Started?
Real financial planning should pay off today, and in 10 years' time.