I feel like I have a pretty solid understanding of personal finance, savings, and planning. But when I think about kids? I have no idea what that looks like. I know that having children is expensive, but beyond diapers and toys, what else should we be preparing for financially?
To help give some perspective, I asked six financially savvy moms to give us their best pieces of advice when in the family planning stage.
1. Think about the lifestyle you want.
Financial counselor and mom of two boys, Jen Hemphill advises you and your partner to get clear on the lifestyle you want, before you start thinking about all the ways you’ll be spending money on your child.
It’s easy to be consumed with the expensive toys and all of the additional costs a baby will bring into your life, but you still need to focus on the life you want to have once you welcome the new addition to your family. That means looking at all aspects of your life and trying to make the decision about how you think you’ll want to live. Will you still want to have date nights? Regular vacations? Do you have a yoga habit you’ll want to continue once the baby arrives?
Knowing what lifestyle you want will help you to plan what your financial life will look like once the baby arrives. For example, if you want to have regular date nights, you need to prioritize setting aside money in your budget for a babysitter. Without this focus on what pieces of your lifestyle are most important to you, it becomes easy to spend money on the things that don’t matter as much.
2. Start living on less.
Finding out she was pregnant gave Chichi Eruchalu and her husband a new reason to get out of debt faster. She knew she wanted to be as financially stable as possible when her child was born, so she and her husband cut their spending immediately. Then they put all their excess cash toward debt repayment. They began living off his salary and putting her entire paycheck toward paying off their debt.
Living on less before her son was born not only helped them dramatically reduce their debt, but it made the transition to becoming new parents much less financially stressful. They had spent nine months scrimping and saving so by the time their baby arrived they had built up a financial cushion and felt comfortable living off half of their income. This helped Chichi to enjoy maternity leave with her new son and take the time off she needed, without feeling financially pressured to go back to work too soon.
3. Review your healthcare plan.
When preparing to start a family, one of the last things I hear talked about is making sure your healthcare plan will provide you with the coverage you need. Jacqueline Ebanks, healthcare entrepreneur and mother of two, strongly encourages people in the family planning stage to review their healthcare plan when they’re in a low-pressure situation; ideally before becoming pregnant.
There are a few things you should watch for when reviewing your healthcare plan to understand how much coverage your insurance carrier will provide, and how much you’ll be responsible to pay out of pocket:
- Understand what basic benefits are available to you: What is the coverage for diagnostics, radiology, lab work, labor, and delivery (including what coverage is available for a c-section)?
- Your pre-term benefits: What coverage is available to you if you deliver your child earlier than expected (including NICU treatments)?
- In-network and out of network: Before asking friends for doctor recommendations, ask your insurance provider what doctors are in network for your plan.
- Understand out of network benefits: If you can’t see your in-network doctor, it’s important to understand if your plan will cover out of network care.
If you do the legwork early enough and find that your healthcare plan isn’t going to adequately cover what you need when you have a baby, you may have the chance to switch healthcare providers. Just be sure to read the fine print before you make the switch. Some insurance providers will have an “exclusion period,” meaning you will need to be insured with them for a certain amount of time before you can take full advantage of maternity coverage.
4. Save for college early, but don’t let it overwhelm you.
We all know that college costs a lot. When starting a family, that’s usually right at the top of the list of big money fears. Michelle Huls Rice, mother of four and University of Illinois employee, is all too familiar with the rising cost of education. After seeing so many students leave a university with a massive amount of student debt, she knew she needed to make sure she was doing all she could to be prepared for her children’s educational future.
When her kids were born she started saving money in a 529 college savings plan and alternate investments that fit her family needs. But she doesn’t let herself get stuck in the details of predicting how much college will cost or what the exact needs will be. “We just try to make the best decisions possible with the resources available to us and put those decisions into action by saving what we can. Thinking too far down the road can actually be overwhelming, so we’re just taking it one step at a time and doing what we can.”
5. Don’t put off career decisions.
While the family planning stage can feel all consuming, don’t defer big career decisions because you are worried about the financial impact of changing your path. Siobhan Barnes was working at an investment bank and knew she was unhappy with her career. So when she was expecting her first child, she realized she needed to focusing on finding the right career path, even though the timing wasn’t ideal to quit and start something new. She knew that if she waited until after her child was born, she might continue to put off her career pursuits forever.
“As a woman, when you start a family it’s easy to put your own needs down at the bottom of the pile. It will never be the right time to chase a promotion or pursue something new, so don’t put off pursuing what you really want just because you’re planning for a family.”
Siobhan recommends setting money aside in a different account to help fund your career exploration. When you’re ready to take a class in a new area or try a side hustle, that money is there and earmarked already to help fund personal growth and exploration.
6. Plan B is important.
One common theme among all of the women I spoke with was that you should plan what you can, but know that things will rarely work out the way you expected them to.
Michelle Cornish and her husband experienced that firsthand. When they were planning for their first child, they decided that Michelle would continue working as a CPA because she was the higher earner, and her husband would take on more of the child care duties and stay home with their new baby. After their first child arrived, they both felt completely differently. Michelle no longer wanted to be away from her baby during the day and her husband wanted to go back to work, but they weren’t sure how to make this new situation work financially.
Michelle suggests sitting down and looking at all options when you’re making post-baby plans. You may think you know how you will feel or what you’ll want to do when the baby arrives, but things can change quickly. You’ll want to have a plan B to fall back on to make the new transition much less stressful.