It seems that my last post really struck a nerve with some expecting parents. Many of you responded with additional considerations and financial fears that parenting will bring. They were so good, I wanted to share a few.
The Loss of Upward Mobility in Your Career
Choosing to stay home with a child is a very personal decision, in which no “right” answer exists. On one hand, it’s expected that a parent would want to stay home as long as possible with their child, especially in those first few formative years. On the other, many people fear that taking a year or two off can significantly hurt your career trajectory. Additionally, many who don’t get paid maternity or paternity leave simply can’t stop working. It’s a conundrum that each family will have to wrestle with. A change in our paid-leave policies in the U.S. may lessen the impact leave will have on your career and ease the financial hardships that may occur. Check out this recent episode on John Oliver’s Last Week Tonight for a great analysis on why we need to change our maternity leave policies.
Less income, more expenses
If you’re an expecting parent, you’ve likely heard the stat that over his or her lifetime a child born in recent years will cost approximately $304,000. In addition, if that child has special needs, the cost can reach the millions. Buying a bigger house, a new car, and all of the latest and greatest baby toys will really add up. This is why it’s so important to get a grasp on your budget, especially if you find yourself in a situation where you will have to live off of one income for a few months.
Speaking of expenses, the cost of day care or a nanny likely tops your list of fears. Most families I know say that the cost of day care is basically like taking out a second mortgage. Many people stop working simply because the cost of childcare outweighs their income. However, a friend offered another perspective on this by arguing that the additional cost could be worth it if you enjoy your career and worry about losing additional lifetime earnings in your industry. Something to consider when you’re weighing your options.
There’s nothing like a big life event to motivate you to get your financial house in order. And as I mentioned, the new costs associated with a baby will often move to the forefront of your mind. But other financial aspects like creating a will or trust, getting life and disability insurance, and making sure you get all of the tax deductions and credits that you can should also be at the top of your list. All of those aspects work together when creating a solid financial plan.
Planning For Their Future
Right when the baby is born, you’ve likely already received money for his or her college education. As with the other concerns, getting educated on the right savings tools for college is critical. You can find my insights here and here.
I understand that this is an extremely stressful time. This situation is one of the many instances where talking about your concerns and sharing ideas with others can only benefit you. So talk to your family, friends, and financial advisors about the best way your family can prepare for such a big change.