Friday, November 21, 2008

Can You Afford to Have a Baby?

Matt and I are years away from having children. I bolded years because we don't want to start having children until our 30s (we are 24 and 25 right now). Some people think this is crazy, but I found the perfect article to explain why.

I stumbled upon this article today, I hope all you Newlyweds out there find it as useful as I did!

Can You Afford to Have a Baby?

{The most adorable baby ever - the Gerber baby}

More and more couples are deciding that having a family is not for them (others yet waiting longer to take the plunge), many citing their finances and a higher cost of living as a reason. While I believe that those who really want kids will always find a way to afford it, there may be some truth to this premise. Don’t "kid" yourself: children are expensive and can financially ruin those who aren’t prepared for all the expenses – both obvious and otherwise.

Here are some financial considerations to plan and account for prior to sprouting your own little guys.

Taking Initial Time Off Work

Although I know of some parents who managed to take little more than a long weekend to pop out their progeny before returning to work, the norm (and preference, thank goodness) still is to take some time off to acclimatize baby to their new world, and adjust to the parenthood lifestyle.

But these days mum isn’t the only one with the option of taking time off; many workplaces respect paternity leave. So between the two of you, who will take time off from work, or how will you divide your respective absences? Whose income is higher or occupation requires more attention? Do you have the option of paid leave, or must you take an unpaid leave of absence? How good is your job security and ability to return to work after your leave?

For those who are self-employed, you will be relegated to an unpaid leave and possible loss of business…or else going back to work right away. Don’t fool yourself: you will not be able to bounce your baby on one knee and office work on the other; new parents are always amazed at how completely occupying their baby can be.

Financial Planning Points for Taking Initial Time Off Work

  • Determine who is taking time off, and for how long
  • Save for an unpaid leave of absence, if necessary
  • If you have a reduced paid absence, save up the extra funds required
  • Save for any absence (and prepare your business) if self-employed

Budgeting for Baby – And Beyond

In addition to all the wonderful baby expenses like food, diapers, toys, clothing, and so on, you may have to consider paying for all this – and your regular expenses – on one income. Many mums (or dads) choose to stay home with the baby for longer than the prescribed leave calls for, often until the kids start school. And if you plan to have more than one child, this can amount to a lot of years.

Financial Planning Points for Budgeting for Baby – and Beyond

  • Save into a contingency fund in case you want to take more time off to be with baby (and yes – this means you!)
  • Budget for the monthly and ongoing expenses of having a new member in the household (once you have an idea of what the budget will be, save the extra money you will be spending on baby stuff, or use it to pay down the mortgage – see below)
  • Ideally take care of all debts before having children so no obligations hang over your head and eat into your budget
  • Ensure your mortgage is manageable even if the interest rates increase at renewal. Consider making extra payments before the baby arrives

Retirement Planning

Planning for retirement tends to take a back seat during initial parenting years, and often doesn’t reappear on the radar until much later – and often too late. Initially you stop saving thinking that just the initial maternity/paternity period will be the toughest, but then childcare costs absorb everything you thought you would save, which is then replaced with schooling expenses, and so on. All of a sudden you have adult children and are standing on retirement’s doorstep without enough funds to stop working.

Especially important to consider are retirement funds for the parent taking time off. Ideally you want to have equal amounts of money in your respective retirement accounts at retirement, so you can draw two taxable incomes and pay less tax overall than if the majority of the retirement funds came from one income. To that end, the parent taking leave can consider maximizing contributions in their last year of work prior to childbirth to make the most of tax deductions and long term growth. Then keep it going with spousal contributions, utilizing the working spouse’s tax deductibility and equally contributing to both retirement plans.

Financial Planning Points for Retirement Planning

  • Don’t assume you will be able to take a short break and resume your retirement savings
  • Maximize contributions for the leave-taking parent in the year or two prior to having the baby
  • Continue making spousal contributions to equalize retirement accounts

Life Insurance

If something happens to either parent, there are deeper consequences once you have kids than there was before. The surviving parent will be saddled with not only grief, but immediately the need to pay for baby’s ongoing care, additional childcare expenses, in addition to the big mortgage and lifestyle you designed for two people to fund. Although you might plan to downsize and adjust your lifestyle accordingly, this won’t be an immediate process, and life insurance can help ease the transition and prevent a total financial meltdown.

Financial Planning Points for Life Insurance

  • Review your existing policies and take out additional insurance if necessary to accommodate the expenses of having a child in tow with one income
  • Review and update your Wills and Estate Plan accordingly

Costs of Pregnancy

Before getting pregnant, it is prudent to figure out exactly what expenses are covered by your health plan and what additional expenses you could face. If there are complications during the pregnancy or childbirth, you could be financially ruined before you are even out of the starting gate. Most disability insurance plans don’t cover pregnancy-related illnesses, even if you are bedridden for months on end.

Some couples choose to have their baby in a country with high-quality but low-cost care (I personally know of a couple who chose to have their baby in Malaysia for this reason among others. Singapore is also a hotspot for “medical vacations”).

Financial Planning Points for Costs of Pregnancy

  • Review your health and disability insurance plans and look for gaps in coverage
  • Budget for additional and contingent pregnancy and childbirth medical expenses
  • If you choose to have the baby elsewhere, budget for the trip, accommodation, medical, and even communication expenses (phone calls to and from family and friends will add up)


Eventually, most parents staying at home with the kids will return to work. However with longer and more varied working hours, this means there will be an additional cost for child care, even if it is just during the hours before and after school.

After discovering the exorbitant cost for full-time childcare (for kids younger than school age), some parents decide that since one entire salary practically goes to childcare, it would be more beneficial for them to simply stay home with the kids until they reach school age. Although this is a sound decision, don’t forget some of the non-salary benefits lost by staying home, such as health care plans, employer-funded retirement contributions, and other government plans and perks funded through taxes (the scope of which vary depending on the country you live in).

Financial Planning Points for Childcare

  • Determine how much childcare will cost, and how it will be funded
  • Save up for childcare in advance of having the child if you can

Planning for Higher Education

This is hard to contemplate as soon as you and baby are home from the hospital, but the clock is already ticking. With the cost of even local post-secondary education being more than a drop in the bucket, it would be best to get cracking on the savings fund. Not only that, but with time on your side, you may be able to save less money overall by using compound growth to your favor.

Financial Planning Points for Planning for Higher Education

  • Prior to having baby, determine how much you need to save to fund your child’s post-secondary education
  • Incorporate higher education savings into the baby budget from day one to ease the overall burden

Having a family is a life-changing emotional decision, with emotional rewards and consequences. But planning for parenthood is a process that must be backed with logic and proper planning to avoid nasty surprises. Tread carefully and tactically, and you will enjoy many happy years of parenthood – and beyond.


  1. That covers the financial aspect, but money isn't the only consideration that should play into the "should I or should I not have a baby now" question. Age and health of the mother, age of family members who may/may not be around to meet the child, etc. are all important as well. In the end, "can I afford it" is a crucial question, but waiting also has its consequences. You just have to find the balance you are comfortable with.

  2. This is a great article. We're waiting a couple years too before the kids come. We know that we want to have a family, however it's really important to us that we are financially ready. I know I'm going to want to take time off work or maybe even stop working for a little while, that requires a lot of planning...bugger.

  3. Great article - we are also waiting. Maybe I will send this to my in-laws who keep asking about when we will have kids! ha ha ha

  4. Thanks for the information this article was really good! I really feel like it's a good idea to be financially set before having kids or at least as much as you possibly can be...having a kid is NO JOKE!

  5. We're also 25 and we're waiting until 30 to have children. I know there are people out there who will criticize our decision to wait, but we're doing what we feel the most comfortable with. The costs are definitely one of the main contributory factors in our decision to wait. You're not alone, don't worry.

  6. great link! We were married at 27/30 and since I'm approaching 30, we don't have much time to waste. It's nice to have a laundry list of financial things to consider -- and sad to see the fun money go away.

  7. Hope you didn't mind, but I copied your post into my blog. Thanks.

  8. I used to say "we can't possibly afford to have a baby" and my mother would say "everyone says that. You just do it, and somehow you make it work". And you know what? It's true. Kudos to you for planning and researching, but I don't think anyone ever thinks they are financially ready. Trust me, you find a way when there is a baby to love :)

  9. Great article. Definitely passing this on to my husband! It's scary but we are 26/29 and I am ready today but we are not 100% financially ready! Oh me-financial worries suck!

  10. If everyone waited until they could "afford" to have kids, no one would ever reproduce. You make it work. Period. When our daughter was born, we were still paying off our debt. We were living in an apartment in North Carolina. We weren't sure if I was going back to work or not, and DH wanted to move on to a different job. Fast forward 2.5 years. We own a house in Texas. DH has a much better job, making a lot more $$, and has an ownership stake in the company where he works. I work from home part time and get to spend the rest of my time with DD. Yes, we still have some debt, but we're in a far better position than we were when I was pregnant.

    Could we have waited on having kids? Sure, but the 2.5 years that my daughter has been able to spend with my father, who is battling a rare and incurable (re: terminal) cancer are absolutely PRICELESS. We have zero regrets.

    Keep in mind as well that a woman's fertility begins to decline at 27. Yes, 27. Unfortunately, some women who wait until they're in their 30s, more established in their careers, more financially stable, etc. before having children sadly realize that they have a long haul with fertility treatments ahead of them.

    You might consider reading, "Creating a Life" by Sylvia Ann Hewlitt. It's a fascinating look at how women make decisions about family and career. After reading that book, my advice: if you are CERTAIN you want children, especially if you want more than one, don't wait too long.

    ps - I tagged you on our blog. Nothing serious, just silly stuff. :)

  11. This is so important to take into consideration! It is EXPENSIVE to have children. Being prepared can take a lot of stress off you as a couple so that youre able to ENJOY the little ones once you decide youre ready.

  12. I definitely think this all boils down to a personal choice. Like pp said its great to be financially stable, but you also risk the chance of getting preggo right away. And add on the desire for multiple children and it could be a struggle. Flip side, it IS hard to have children when you're not financially prepared to do so. I had DS young (and financially probably not ready) and it is difficult..but like you said make it work!

  13. I think you are being really smart to wait. I married at 27 and I was 33 when I had our son. That's a great age, I had a really easy pregnancy and we were financially ready. I agree to some extent if you wait until you can afford to have a child you never would, but you do need to be smart about it. I have been able to stay home with my son these past 4 1/2 years and we have no debt besides our mortgage. When he starts school I will probably go back to work, at least part time. I just see too many people who jump into parenthood when they really can't afford it and it puts such a big strain on the marriage.

  14. I think there's a lot to having a baby, besides the financial point of view. I had my first at 26, and have been a stay-at-home mom ever since. I love it, it was a lot easier having one at 26 than at 31 - body and health wise. We have made many sacrifices for our children - that's what children are about. They teach you that very little in life is about yourself and things are just that - merely "things."

  15. Hey Bryn! This is totally off subject from your post, but I want to say I got my magnets yesterday! Thanks! They are super cute!!

  16. This is such a great post. It's a reminder that being prepared is the most important thing. That means financially, emotionally, physically, etc. It's so great that you and your husband know what's best for you and are willing to make the sacrifice of a few years in order to be financially ready.

  17. I'm expecting, and when I got pregnant, it wasn't necessarily "planned" (as in, we hadn't been trying for months on a schedule, etc.). The financial issue was big for my husband (he's very logical) and when we found out, he had to go through the initial "Ok, how are we going to make this work" phase. But it all boiled down to the fact that there's no perfect time. There will always be SOMETHING that needs to be in better order, and it just won't ever be perfect.

    We have claimed the verses "Children are a treasure from the Lord" and "Do not worry about tomorrow; tomorrow will worry about itself." Granted, it's important to be financially responsible, but overanalyzing will take the joy out of having a child.

  18. Very informative... what i like to add for the readers is : When you are younger you can invest larger amounts in equities. You can do this by investing in stocks and equity funds. Unless you are good at reading and understanding company balance sheets and have the time and expertise to track stock markets, we strongly recommend that you take the mutual fund route.
    Retirement Plans, Retirement Savings, Retirement Investments,Retirement Income, Retirement Funds,Home based Business

  19. Great post - too few people realize the financial burden of raising children. I was 30 when I had my first son and was horrified to learn what the price of daycare was. We currently have two children in daycare and pay a whopping $2000 a month for it. And no, our kids are not in some luxury daycare center - this is just par for the course in New Jersey. It's hard - but we love them and we're willing to sacrifice vacations and eating out for now. We know that eventually, they'll be out of daycare and things will ease up. Of course, then it'll be time to start saving for college!

  20. We got married at 25 and waited until 30 to have a baby. I'm now 35 and have 2 beautiful daughters. I am often glad we waited for 2 reasons:
    1. I have much more patience now than I did in my twenties.
    2. I'm glad we had 5 fun, totally selfish years to learn to be a couple. We travelled and had fun and had some tough times. You need that strong relationship to rely on when you have babies needing all your attention, energy, and love.

    Whatever works for you is the RIGHT THING. No one but you can decide when its right, no matter what the reasons.
    That said, best of luck!

  21. A lot of people worry about this. I definitely think that one important thing to do is get life insurance .

  22. I agree with this post. There are many things to look at before making the choice to have a baby. I think it is really important to decide if your family can live on one income. That seems very important. Sure there are lot's of mom's staying home to raise the kids. Don't get me wrong being a full time mom is a LOT of work. Sure there are some down times also. Is there any reason that we can not have purpose, health and prosperity? I don't believe so. What about making the difference in a total strangers life? This is all possible. Please take a look here and see how it can be done. Thanks.

  23. Good article even though if you really want to have to have children you shouldn't put it off too long after 30 since fertility goes down and you might not become pregnant at your first attempt either. That said, there are bigger variations between individuals than just the age factor when it comes to fertility, and some women are lucky and remian highly fertile for longer than the average. Perhaps there is never a really perfect moment between financial and biological considerations?

  24. And now a word from a much older perspective... (I'm 49)

    The longer you wait, the more expensive everything gets. That includes daycare, food, clothing, college, cars, etc. We started saving for our kids' college years when they were born. Imagine our shock when the financial planner told us how much money we would need to save by the time our oldest started college. For the same amount of money, we could have paid for half of a four bedroom house (in 1986).

    You do not want to be going through menopause with a teenager in the house. Trust me on this one.

    Which leads to other health issues, and not only yours. As you age, you will probably be expected to help care for your parents. Do you want to be balancing aging parents and children who still constantly need you?

    Will you be physically able to fully participate in your child's school years? I realize there are no guarantees in life, but the younger you are, the more energy you will have.

    Will you become so wrapped up in your career that eventually a child seems like an intrusion? No one questions your love for your child, but will you resent the time childcare takes away from your move up the career ladder?

    Keep an open mind. Remember, God has a tendency to sometimes laugh at our elaborate plans!

  25. Great info. I am a mother. I had my first child at 18 and let me say we were not ready. I have been with my husband since I was 15. He was my first boyfriend so I was never worried about who he was as a man, but we were just young. 11 years later and things are great, but having a child when you are not ready is a struggle. I tell my sister at 21 to wait always wait and live your life! However, I would not change a thing!

  26. I think this was a good article overall with some very valid points, but I had to chuckle at the end when you claimed to know how to ensure years of happy parenting--when you are not a parent yourself. Seemed a bit silly but well-intentioned. In my opinion, the financial aspect is just one small piece of the pie--there are far more important ones if you ask me (yes, I am a mom). I know very wealthy people who were completely unprepared to have a child. They got just as stressed out as anyone else. Money didn't make it any easier for them!

  27. Amber - to your comment, the last paragraph is part of the article, not something I wrote :)

  28. I totally agree with Jessie! I know this post is old, but I recently came across your blog and took the time to read what what others had to say. I think what you and your husband decided was best for you guys and that's all that matter! Have fun and I can't wait to follow along when you do decide to have kids!!!

    I'm becoming a follower!

  29. to those who aren't seeing eye to eye with this article exactly:

    being able to afford children is a crucial question. you shouldn't just have children because your grandma might not be alive to see them. sure, you can definitely "make it work" but if you're looking at your finances and things aren't looking so great, you should most definitely wait. i'm the product of parents who weren't financially stable (similar to the n. carolina apartment situation mentioned above) and while things worked out great for that person, it didn't for us. i've been homeless, lived in halfway houses and bad situations because my parents didn't have a solid plan.

    you should be able to afford your children. end of discussion.

  30. Great article - we are also waiting. Maybe I will send this to my in-laws who keep asking about when we will have kids! ha ha ha

  31. That covers the financial aspect, but money isn't the only consideration that should play into the "should I or should I not have a baby now" question. Age and health of the mother, age of family members who may/may not be around to meet the child, etc. are all important as well. In the end, "can I afford it" is a crucial question, but waiting also has its consequences. You just have to find the balance you are comfortable with.


THANK YOU for taking the time to share your thoughts. I appreciate each and every comment.

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