Is it Ever the Right Time to Start a Family?

Q: My partner and I are looking forward to starting a family, but the sky-high cost of raising a child is scaring us off. Is it ever the right time to start a family?

A: Let’s explore the finances of starting a family and steps to take for financially preparing yourself for this exciting and big step.

The real cost of raising a child

According to the U.S. Department of Agriculture (USDA), it costs $233,610 to raise a child to age 18. When adjusted for inflation, that number is closer to $288,094, not including the cost of college. 

It’s important to note, though, that this number is only an average. Costs can vary tremendously with each family. You may want to do some of your own research to find out what it will likely cost you to raise a child to adulthood.

Another important point to consider is that you do not need to have all these funds on the day you bring Baby home from the hospital. Most expenses are spread across 18 years. 

Now you’re ready to determine if you’re financially ready to start a family. 

Assess your current financial situation

Review each of these components of your financial health:

• Income streams
• Ongoing and occasional expenses
• Outstanding debt
• Debt-to-income ratio
• Emergency funds
• Long-term savings and investments
• Assets

If you have a monthly budget, review this, too. If you don’t yet have one, it’s a great time to assign a dollar amount to all your monthly expenses. 

Budget for new expenses

Next, jot down a list of expected baby expenses for starting a family. Include one-time expenses like a stroller, crib and carseat, as well as ongoing expenses like diapers, clothing, food and child care costs. 

Once you’ve completed your list, incorporate these items into your monthly budget. To make room in your budget, you can cut some discretionary expenses, trim several categories or look for ways to boost your income. 

Plan for future expenses

Planning for your child’s future expenses ahead of time will reduce the financial burden. You can do this by creating a savings plan for each expense. For example, you can set aside a certain amount each month for child care costs or start a college savings plan, such as a 529 savings account.

Review employer policies

Check the maternity/paternity leave policy at your workplace, as well as the policy at your partner’s place of work. If no paid time off is offered, you may need to apply for disability insurance.

Parenthood is not a privilege reserved for the wealthy. With proper planning and budgeting, you, too, can prepare to welcome a baby into the world.