We all remember the old nursery rhyme:
First comes love
Then comes marriage
Then comes baby in a baby carriage
Most unfortunately forget the next verse:
Children are expensive
You need a plan
But you’ve got me, so don’t disparage
Okay, so my verse isn’t quite as catchy, and it doesn’t rhyme, but the point is still valid: From the moment you discover a baby is on the way, it is time for some important conversations because preparation is critical.
Here are four financial things to expect when you’re expecting:
- Take a hard look at your budget. A new member of your family means a lot of new costs. Yes, that includes the basics, like formula, diapers, bibs, clothes, and that Taylor Walnut crib from Crate & Barrel. Begin the new budget now while you are pregnant. Think of it like a nine-month budget audition. You will learn where you can scrimp and save and “essentials” you aren’t ready to give up.
- Is your house ready? I know you think this is a tip about nesting, but really it’s a question of size: Do you have enough room in your house, condo, or apartment for a child? If the answer is no, you can consider moving or perhaps a renovation to increase your square footage. Initially, you might be able to share a room with a newborn, but everyone needs space.
- A baby is expensive, but daycare is even more expensive. As you build a budget, You and your partner need to take a hard look at your careers and the cost of daycare. In large metropolitan areas, daycare can cost as much as $1,500 per month. You need to carefully examine what you are bringing home each month and decide if it might make more sense for someone to become a stay-at-home parent until junior heads to school.
- College. While we’re talking about school, here’s the big worry: The cost of college. Yes, college is expensive. When we work with families to build a college nest egg, we tell them they need to open a 529 college savings plan and begin saving as soon as possible. According to a Vanguard study, at the current growth rate a child born today could need as much as $500,000 to attend college. We tell parents to try to save about 75% of that so that their child is still eligible for financial aid and scholarships.
At the end of the day, all of this can feel very overwhelming. So, let’s take a deep breath. All the above are important conversation to have and preparation is key, but just by reading this you and your partner are on your way to providing an amazing life to a wonderful newborn.
Now, go put that fancy crib on your registry and let Aunt June buy it and maybe Uncle Mark can assemble it for you because this financial advisor is terrible with a hex wrench.
Stephen Carrigg is the Director of Investment Analysis, Private Wealth Advisor at Integrated Partners. Send him an email at firstname.lastname@example.org