You and your family are expanding and welcoming another member. Congratulations! Having a child, whether it is your first, second or beyond, is a rewarding process of adding more personalities and lifelong memories into your family. Preparing for the arrival of the child can be an incredibly busy period of getting all preparations completed in time. These often include preparing the child’s room or nursery, purchasing clothes, toys and accommodations for them, and becoming mentally, emotionally, and financially prepared to raise a child.
Raising a child in today’s world is no small feat. In addition to preparing and educating them for all life has to offer, it can also be an enormous financial cost over time.
For a child born in 2015, a middle-income married-couple family will spend anywhere between $12,350 and $13,900 annually, or $233,610 in total from birth through age 17 on child-rearing expenses.1 Of course, these figures are bound to vary based on your family’s personal situation, location and preferences—and also do not include college costs, if you intend on contributing to your child’s college education.
So, how do you and your family financially prepare for a new child?
You have much to consider—and potentially several of these items are things you may not have considered prior to adding children into your family. Working with a financial advisor is a great option to help cover all of your bases and ensure you’re taking the appropriate steps:
The arrival of another family member won’t just be another physical presence in your household—it will also come with significant changes to your household budget. Plan out if you will need to increase the expenses in your budget and how you will adjust to these changes. These items can include increased groceries, expenses such as new clothing, bedding, strollers, car seats, etc., child care, increased medical expenses, and so on. Develop your budget and start tracking expenses to keep your household on track in a busy time full of change and other preparations.
If you receive an employee benefits package, you’ll want to review and update your policies to reflect your newest family member. For health insurance, you may want to check with your carrier on how or when to add the child, whether or not your desired pediatrician is within your coverage, what will be covered for check-ups, and so on. If you have a life insurance policy, you may want to consider increasing your policy for the future, as well as adding in your new child to the policy. Additionally, review your disability insurance policy to ensure you have an appropriate policy with the addition of another family member. If you do not currently own either life or disability insurance, we recommend discussing your options with your financial advisor to gain the proper risk management coverage for you and your family.
If you have a will, trust, or other associated estate planning documents, you will need to consider working with an attorney to update these to reflect your new child. While estate planning can be a grim topic, designating a guardian for your child or children and other related decisions are crucial and provide you with a sense of security if anything were to happen to you.
The idea of saving for college for your child at this point may seem premature—however, with the costs of attending college constantly on the rise, saving as early as possible could give you an advantage. Discuss how much you are able to start saving to set aside for college now as well as what your college funding options are with your financial advisor.
There are numerous other considerations to take into account for welcoming a child, such as applying for a social security number for them, evaluating whether your current home can accommodate additional family members, and much more. Your financial advisor can help you navigate these items, while also taking into account your other financial goals. Remember that even though you are financially preparing for a new child, your funding your retirement should still be a priority. It may seem like it’s far away and something to put on the backburner for now—yet continuing your efforts will allow your nest egg to grow further.
Welcoming and raising a child is one of the noblest and rewarding acts you can undertake. This does come with many financial challenges—from early on through their school years and beyond. However, thinking ahead and preparing will help you and your family to enjoy the company of your new family member when they arrive, rather than worrying about financial considerations.
Discuss the topics above and much more with your financial advisor to ensure your family is prepared. Contact a North Star Resource Group financial advisor in your area here.
1 “Families Projected to Spend an Average of $233,610 Raising a Child Born in 2015.” U.S. Department of Agriculture, Press Release No. 0004.17. Last modified March 8, 2017. https://www.usda.gov/media/press-releases/2017/01/09/families-projected-spend-average-233610-raising-child-born-2015.