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Money Moves You Should Make Before Having Kids

7 minute read

Nick Steinberg

By Nick Steinberg

Over the last few decades, the birth rate in developed countries like Canada and the United States has significantly declined. While it’s true that young people today are more likely to go childless, there are still many millennials who want to become parents. Unfortunately, economic factors such as stagnant wages and out of control housing prices have deterred many would-be parents from having children.

While there’s no getting around the fact that starting a family will put strain on your budget, there are still ways to afford it — even on a modest household income. With careful planning, the following eight money moves will put you in a strong financial position by the time that first baby comes along.

Have at Least One Steady Source of Income

Your family planning efforts are going to go out the window fast if you don’t have a steady source of income. You may be making ends meet now. However, if you’re living paycheck-to-paycheck or work in a volatile position, you’ll be entering parenthood at a financial disadvantage. Of course, there’s really no such thing as true job security anymore. Even still, some professions or industries offer more protection than others.

Self-employment is more viable than it’s ever been but the pay tends to be quite sporadic. For financial peace of mind, it’s a good idea to be in a household where at least one spouse brings in a reliable, always-on-time paycheck. Parenting is going to throw enough curveballs at you as it is. The last thing you’re going to want to worry about is whether or not money is going to show up in your account when you really need it.

Set Up a New Baby Fund

In some ways, having a child is almost like taking out an additional small mortgage. That’s because it costs approximately $250,000 to raise a child from infancy to age 18. Although that figure is spread out over almost two decades, there is still a large upfront cost to having children. If you have health insurance, most of the medical costs associated with having a baby will be covered. Despite that, there are still a lot of unavoidable out-of-pocket expenses to cover right away. These include, but aren’t limited to.

  • Stroller.
  • Diapers.
  • Car seat.
  • Crib.
  • High chair.
  • Carrier wrap.
  • Food (remember, you have an extra mouth to feed now!)

To help ease the financial burden of these upfront costs, it’s a good idea to setup a new baby fund. If you’re only in the planning stages of having a child,  that’s good news. You have months (or even years) to set money aside before your baby arrives. To make the money you save go as far as possible, put it in a high-interest, no-fee savings account.

Everyone’s needs are different, but you should aim to have a few thousand dollars saved up to cover costs during and after pregnancy. If you set aside $100 a week over the course of a nine month pregnancy, you’d have $4,000 saved by the time your newborn arrives.

Create an Emergency Fund Too

Whether or not you decide to have children, having an emergency fund is one of the smartest financial moves you can make. Having three-to-six months of living expenses set aside can help you make ends meet in the event of a sudden job loss, injury, or illness. When you have an additional mouth to feed, it’s even more important to have a contingency plan.

That being said, don’t make the mistake of having your new baby fund do double duty as an emergency fund. You need to keep them separate. Your baby fund is meant to be spent on things you need. However, the emergency fund should only be dipped into if you really need it. For more information on emergency funds, check out our savings accounts guide.

Draft a Will

Drafting a will is something many young adults put off. In fact, an estimated 88 percent of Canadians between the ages of 27 and 34 don’t have one at all! The numbers for Americans aren’t that different, either. However, when there’s a child in the picture, it’s an essential task to check off. No one likes to think about not being around for their children. It’s a scary thought. However, you owe it to them to have a legal document in place that ensures they’re properly taken care of if the worst were to happen.

Many people think wills and estate plans are just for the rich. That’s simply not true. If your financial situation is fairly straightforward, you can set up a legally-binding will online for a fraction of the cost of visiting a lawyer.

In Canada, is a lawyer-approved solution that allows you to establish wills, power of attorney, and living wills at an affordable cost. For American readers, this list of DIY will services is a good place to start. It has a variety of platform options, with varying fees. Even if you ultimately decide not to have children, having a will is the only way to guarantee your assets go to the right place in the event of your death.

Purchase a Life Insurance Policy

Along with drafting a will, purchasing a life insurance policy is one of the most important things that young adults tend to put off. Since you’re not required to have life insurance in order to… well, live, it’s understandable that many people see it as an unnecessary extra expense. However, if you’re thinking of having kids, it’s time to throw away the idea that you don’t need life insurance. A life insurance policy helps ensure that your beneficiaries, such as your spouse and children, are financially taken care of if you pass away.

Unfortunately, insurance companies won’t always do a great job of educating you on the benefits of life insurance. You may be unaware of the choices you have. When it comes to life insurance, you have two basic options.

Term Life Insurance

This type offers coverage for a specified period of time. It is almost always less expensive than whole life insurance. Term life insurance policies typically cover a period from 5-to-30 years, with a predetermined guaranteed death benefit. Once the term is over, you may be able to renew your policy. However, it will probably be at a higher cost. Otherwise, you’ll need to seek out a new policy entirely.

Whole or Universal Life Insurance

Like the name implies, these policies provide a death benefit that never expires. For this reason, whole life insurance tends to have higher premiums than term policies. However, some of them have the added benefit of building cash value over time.

How much coverage you need depends on a number of factors. How many dependent do you have? Do you rent or own your house? How much is left on the mortgage? What’s your yearly income level? How much can you afford for a monthly premium? A good rule of thumb is to find a death benefit that is six-to-eight times your annual salary. Start with our in-depth article about life insurance. If you’re unsure of your needs, it’s always best to consult a financial adviser.

Set Up a Retirement and Education Savings Plan

We’ve bundled these two together because they’re both important long-term financial investments. More than likely, you’re already put some money away for retirement. That’s great! But it’s important to maintain these contributions once you have kids. With the added costs of raising a child, you may be tempted to decrease the amount you put into your retirement fund each month. This may help you stay on budget in the short term, but it will only hurt you in the long run.

It can be a little more difficult figuring out how to fit an education fund into your budget. Many parents will have different views on how much financial help their children should have when they’re ready for college and university. You also can’t predict what kind of education your newborn will want to pursue in 18 years. Med school is more costly than community college, to put it simply.

However, even a small monthly contribution to a savings plan can go a long way in easing the financial burden your child will face when they enter higher education. For more on saving for college, check out our guide to starting a Registered Education Savings Plan (RESP) in Canada. For American readers, there are multiple state-approved programs or private financial products available to help you start a college fund.

Develop a Child Care Plan

Child care is one of the largest expenses parents have to deal with. It’s important to know what to expect going in. According to a 2018 survey of over 1,200 parents with children under the age of six, 82% said they spent $500 or more each month on child care. A whopping 85% said they had not saved any money for child care prior to having a child. If you’re planning on becoming a parent, it pays to look into affordable child care options early. You should also check if you’d be eligible for any assistance programs. Your state or province probably has some type of service, if you meet the qualifications (usually related to income levels).

It’s also a good time to think about your work schedule and how it will play into your child’s life. Some parents choose to reduce/change their hours when the baby arrives. Some will even put their careers on hold to become stay-at-home parents. However, these types of decisions come with significant financial trade-offs. Will your family save enough on child care to make it worth going down to a single income? Whatever you decide, make sure your household budget can handle your child care plan.

Get a Handle on Your Debt

As explained in the intro, debt is one of the biggest obstacles holding young people back from starting families. It’s not hard to see why. The average millennial is saddled with $27,900 in debt. That’s a massive financial burden to carry around, even if you don’t have children to take care of. While you don’t need to eliminate all of your debt before having kids, you should still try to get it to as manageable a level as possible.

If your situation isn’t desperate, there are many great apps on the market to help you focus on debt repayment. However, if you’re carrying a high debt load, you may want to consider seeking out a debt relief plan. Once a kid’s in the picture, it’s going to be much more difficult to chip away at high-interest debt. For this reason, it’s a smart money move to pay down as much of it as you can while you still have the financial flexibility to do so.

Cash with Pacifier on TopShutterstock
Nick Steinberg

Freelance Writer

Nick is a writer based in Kitchener, Ontario and has worked in online publishing since 2013. Follow him on Twitter and Instagram @Nick_Steinberg.


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