We’ve all heard it: If you wait until you can afford to have a baby, you’ll never have one.
It’s true that having and raising children is an incredibly expensive proposition. Parents of babies born in 2015 will spend more than $230,000 on their kids over their first 18 years—and that’s not including college.
Can your finances handle a baby? 5 tips to get you started
If financially planning for a baby seems daunting, but you’re still excited to start your family, know that it is possible. Making a few smart money moves now will get you on the right financial path by the time your little bundle of joy arrives.
1. Build up your emergency fund.
It’s always important to have a rainy day fund. This is especially true once kids come along and bring with them higher chances of unplanned expenses popping up. Prepare by building an emergency fund of at least three to six months’ worth of expenses in an easily-accessible account.
2. Practice living on a budget.
Your expenses are going to climb after the baby arrives, so start scaling back your spending now. Go line-by-line through your monthly expenses to determine your “wants” versus “needs.” Small changes like cutting back on one meal out per week and slimming down your cable package could save you hundreds each month. Changing habits can be hard at first, but once you’re looking into your baby’s eyes, you won’t mind that you stopped getting your daily latte.
3. Read the fine print on your health insurance.
Jumping to the family health insurance plan is expensive, but as new parents you’ll likely be glad to have it. Today, many plans cover preventative care and immunizations, but be sure to check your options carefully. It’s possible that other doctor visits may require you to cover a copayment or co-insurance fee. Use the calculators on your insurer’s website to see how your potential out-of-pocket costs on your current plan compare with other available options. The good news: Having a baby is a “qualified life event,” which means that you don’t have to wait until open enrollment to switch plans.
4. Research the cost of childcare.
Make sure you and your partner are on the same page about who’ll care for your child as well as the cost associated with your choice. If one of you plans to stop working to take care of the baby, adjust your budget to account for the lost income. If you’re planning on using daycare or hiring a nanny, plan how you’ll cover those costs, which average around $10,000 per year, per child for daycare or nearly $30,000 for a full-time, in-home nanny.
5. Get a head start on college savings.
It’s never too early to start saving for your child’s college education; but before opening a college savings account, establish your emergency fund and pay down any high-interest debt. One of the best places to stash college savings is a 529 account, which allows money to grow tax-free until you tap it for qualified educational expenses.
Like all security investments, money put into a 529 account will fluctuate in value, and could lose principle in a market downturn. Talk with your financial advisor about the appropriate mix of investments for your risk tolerance and time horizon—plus how and when to adjust it as your child gets older.
Opening an account in your child’s name requires their Social Security number. If you want to get started before they’re born, though, you can open the account in your own name and roll it over to your child later.
So, how much money do you need to have a baby?
There’s no set dollar amount for when you’ll be ready to have a baby. No matter how well you prepare for your little one, you’re bound to encounter some surprises. But if you take care of these financial tasks ahead of time, it could help make life less stressful later on, when you’d rather sleep, stare at your baby and… did we mention sleep?