If you’ve ever thought about having kids, I’m sure nothing you read and no one you talked to about it promised you it would be cheap. Quick reminder: It costs an estimated $300,000 to raise a child through age 17, according to Finder.
One look at that number could have you second-guessing whether you’ll ever be ready to have kids — at least, on paper.
Policygenius recently found that 42 per cent of parents in the U.S. weren’t financially prepared to have a child, according to the company’s first Parents & Money Survey. When the 1500 parents surveyed were asked what financial goal they are the most stressed about, 32 per cent said paying down debt, followed by 21 per cent who said saving for retirement.
The insurance comparison website suggests drafting a budget, saving up for emergencies, paying down debt, increasing your retirement savings, and opening a savings plan for your future progeny. You know, just a few to-dos for your list.
Before you hyperventilate and shelve your plans to reproduce, here’s how to take this financial preparation endeavour one step at a time.
How to make a financial plan for having kids
Approaching these financial goals one at a time can help you prepare for the costs of raising a child.
Check in on your emergency fund
Before you start bookmarking baby name ideas, take a look at your current budget and your emergency fund. Do you have three-to-six months of expenses stashed away? Can you increase the amount you’re saving each month, to make adjusting your budget easier when post-baby expenses like childcare become more tangible?
Pay down debt
If your emergency fund is flush, then focus on paying down debt like credit cards or personal loans. Think of it this way: If your debt stresses you out now, imagine how it might weigh on you when you’re caring for a child. That money you put toward your debt could be put towards the care and feeding of your kid if you can get rid of as much of it as you can ASAP.
Increase your retirement saving
If your emergency fund is healthy and you don’t have debt, then it’s time to increase your retirement savings. Policygenius says even increasing your retirement savings amount by 1 per cent can get you closer to the recommended amount and put you on better financial footing for the future.
Once you feel comfortable in these three areas, you can think about some of the many baby-preparation costs you’ll face, from health insurance to life insurance to considering how your income may change when a child arrives.