How to plan financially for starting a family

The prospect of growing your family may fill your heart with butterflies, excitement, nervousness—or, most likely, all of the above.

There’s a lot to look forward to, but also a lot of change. And when it comes to postbaby finances, the more you plan out your budget now, the less you’ll be distracted by money concerns once the baby arrives. Here’s how you can prepare your finances, so that you have more energy to focus on parenting when the time comes.

Step 1

Take stock of your monthly budget. Why it helps: While it might not happen right away—thank you, baby showers! — your priorities and budget will almost certainly evolve as your family grows. Taking some time now to consider how you’ll cover additional costs such as formula, diapers and clothing can help you avoid sticker shock when these necessities do eventually—and inevitably—pop up. It’s also a good idea to put together a list of all the items you’ll need to stock the nursery and otherwise prepare for baby’s arrival. You can’t properly budget without understanding the true costs you face, so this step is key.

How to do it: Track your budget for two or three months to determine where you can make cuts. For example, the money going to that cable plan you never watch or the membership to a gym you haven’t visited in months can be transformed into resources to better prepare for your bundle of joy.  

Step 2

Consider big changes you’ll want or need to make. Why it helps: Aside from day-to-day changes, larger expenses are bound to crop up as well: You’ll need to figure out how to add a dependent to your healthcare plan. You may want to move to a larger home. Perhaps your current vehicle needs to be traded in for something a bit more child friendly. There’s baby proofing to be done from all angles.

How to do it: Discuss family healthcare options with your Human Resources representative as soon as possible. If you aren’t already doing so, inquire about directing funds into an FSA or HSA tax-advantaged savings account to help cover future medical expenses. When it comes to moving, consider chatting with a financial professional about setting a realistic budget based on your estimated new expenses. Once you have that information in hand, you can open a high-interest savings account and start socking money away for a down payment.  

Step 3

Factor in childcare. Why it helps: Whether you choose to return to work after starting a family or not, it’s likely that childcare in some form—from full-time daycare on down to the occasional babysitter for a date night or time for a massage—is in your future.

How to do it: A little research can go a long way. Listings on childcare websites can provide you an idea of the current going rate for childcare in your area allowing you to factor that cost into your monthly budget. Look into ways to save on childcare expenses by joining a nanny share or swapping childcare duties with another parent who stays home with the kids, works part-time or has flexible hours.  

Step 4

Start thinking about college. Why it helps: Paying for college is one of the most profound, gratifying, and, yes, expensive gifts you can give to your child. As such, even if you aren’t currently expecting, it never hurts to start thinking about how this will factor into your future financial plans.

How to do it: The earlier you can start saving for your child’s education, the better. Most college savings accounts—including the popular 529— gain more interest over time. And depending on the state you live in, your 529 could be tax deductible. Speak with your accountant to learn more about college savings that may fit your unique set of circumstances and resources.  

Step 5

Don’t lose sight of your own future financial goals. Why it helps: With all the change about to happen, your own short- and long-term financial goals can sometimes get lost in the mix. Don’t let it happen. The future is always right around the corner, so it’s important to prepare for the best possible version of it.

How to do it: Max out your 403(b) retirement accounts to your full advantage and consider opening an additional IRA with any extra funds. If you can, provide those accounts an added boost by depositing money from future bonuses or pay raises as well. Starting a family is bound to be one of the most exciting adventures of your life. With a little forethought and proactive adaptations, you can begin that journey on a surer financial footing and be fully prepared for all the wonders that lie ahead.