If you are considering starting a family soon, you probably have many questions regarding whether you and your spouse are ready. It is only fair, considering the level of care and commitment required to be not only a parent, but a good one.
One of the biggest concerns shared by parents-to-be is whether they are financially prepared. Raising a child comes with its fair share of expenses – $233,610 is the estimated total cost of raising a child from birth to the time they turn 18 – so it is wise to consider your financial situation before making the decision.
While there is no one-size-fits-all answer – and you might never feel truly prepared – these five signs could indicate you are financially ready for a family.
It is no secret life is unpredictable. Unexpected medical bills, car or home damage or changes at work can occur at any time. When you add a newborn into the equation, any sudden expense becomes a lot more complicated. Being prepared for such occasions will pay dividends.
It is not just emergencies you should prepare for – though Washington has generous maternity leave policies, not all states do. If you or your spouse become unemployed while taking care of a newborn, setting money aside to cover several months of day care, bills and baby supplies will come in handy.
Your career is your primary source of income, so it is crucial for you to be able to count on it to provide for your new family and build your savings. While you cannot predict what will happen in the future, you should feel somewhat secure in your current position or ability to find gainful employment should you lose your current job before committing to a family.
To determine the stability of your career, ask yourself these three questions:
Paying for a quality health insurance plan is essential, especially with a family. As a parent, your child’s well-being is your responsibility. If they get sick or hurt, you will have to pay for doctor and emergency room visits, which according to one study, cost more than $1,200 on average.
If you already have health care, explore the adjustments you need to make to include a little one. Expanding your plan’s coverage will likely increase your premiums, but the peace of mind that your child’s health is taken care of is well worth the price. Plus, it will be far cheaper than not being prepared in an emergency.
Raising a child involves making sacrifices – primarily involving your finances. Diapers, clothing, child care, toys and food add up very quickly, and covering them all will require good budgeting skills. If you do not already practice good budgeting habits, you may find it difficult to adapt to the costs of having a child.
It is also important to embrace living frugally if you have not already. You should be comfortable with thrift shopping, accepting hand-me-downs from friends and family and finding other ways to reduce everyday expenses, if the need arises.
Many people assume they need to be debt-free to afford starting a family. But when you consider the average American household carries more than $100,000 in debt, this may not be feasible – by the time your debt is paid off, it may be too late!
Focus on getting it under control instead of eliminating it. Make payments on time, pay with cash when possible and work with a financial adviser if necessary. Financial expert Dave Ramsey often counsels potential parents to only allow debt to dictate family plans in extreme situations, such as during bankruptcy proceedings.
Also, remember not all debt is equal. You’ll likely want to buy a house in which to raise your family, and the vast majority of first-time homebuyers will need to acquire a mortgage to do so. That doesn’t make those people irresponsible or necessarily financially unstable. Having a mortgage with a reasonable interest rate is vastly different than having excessive credit card debt with double-digit interest.
Starting a family can be exciting, but if you are concerned about how credit card and student loan debt might interfere, it can be nerve-wracking. However, you have options. American Financial Solutions is a non-profit organization dedicated to helping individuals find their path to debt relief and financial stability. Certified counselors are standing by – call (888) 864-8548 or contact us online to get started.