Considering Money in Family Planning

With the increasing variety of contraceptives and natural planning methods available today, many couples are deciding precisely when to get pregnant and have their first or subsequent children. The decision-making process considers a lot of factors, but from chatting with people who are trying to get pregnant, and our own experience, I know that money is a big part of the equation.

Given that you’re thinking about money while trying to decide when to get pregnant, what exactly should you be considering? What I’ve found is that most couples will leave this rather vague—“We want to be more financially secure,” or “I want my husband to have steady job,” or even “We want to save up first.”

Today, I’d like to get you thinking about specific things you might consider if you’re thinking about kids, and how to make these factors meaningful to your decision-making process.

The Big Picture

There are 7 financial items I would consider when making the choice to have a baby. Since everyone’s situation is different, it’s likely that 1 or 2 of these are the most important in your life, while the rest may be of little consequence. Take an honest inventory of where you stand with each one:

  1. Status & coverage terms of health insurance.
  2. Security of work.
  3. Number of existing kids.
  4. Other family members having kids.
  5. Amount of savings.
  6. Amount of debt.
  7. The “bread basket” factor.

Some of these may be obvious, while you’re probably wondering why others made the list. I’ll make my case for each one below:

#1: Health Insurance

Among the financial responsibilities of having a child, perhaps none is larger than the actual cost of carrying and delivering the baby. The cost to our insurer of our first birth in 2010 was close to $15,000 (ours was closer to $0). If we did not have insurance and paid out of pocket at the pre-paid or cash rates, it would have still approached $10,000. That’s a tall order for anyone’s finances.

As a result, it’s critical and beneficial in most cases to find a health provider that will cover pregnancy and birth and do it at a reasonable cost. The problem is that many insurance plans, especially individual ones (those not obtained through your employer), will not provide coverage, or will only do so with an expensive rider.

Whatever the case may be in your situation, the key is to completely understand your insurance coverage and benefits you’ll receive during pregnancy, and to evaluate any different or additional insurance options you might pursue. Do it now, because by the time you get pregnant, it’s already too late!

#2: Job Security

The worst-case scenario for a couple having a new baby is deciding that Mom will stay home and finding out Dad will be laid off shortly before or after birth. The result is a two-income household that is down to no income and a slew of brand new baby expenses.

Along the way to the worst-case, there are a bunch of other disastrous scenarios that could impact your new budget—a pay cut, hours worked cut, furlough, unplanned relocation, and more. While job security is notoriously hard to predict, you should have some idea of how stable your employment is over the next few years, at least in the sense of probabilities.

#3: Got Kids?

The number of kids you have already definitely plays a part in planning. On the upside, you gain many efficiencies of scale with subsequent kids by not having to repeat many of the large, one-time purchases you made for your first child. Some of your other expenses, like entertainment (games, toys, movies, etc.) would also be fairly repetitive. You could even hope to get discounts on programs you put your kids in with multiple enrollments.

On the downside, adding kids will most definitely put additional pressure on your budget with regular expenses, will divide your attention further (perhaps leading to some unintended consequences), and other considerations you were able to manage with fewer kids (such as child care at home, etc.) may not be possible with the larger number.

#4: Extended Family

Considering kids in the extended family might seem like an odd factor, but if well-timed, kids can be incredibly beneficial to each other in terms of sharing resources. Clothes can be shared or passed down from child to child, as can many of the other toys, furniture, and just about everything except disposable supplies.

I’m not saying planning to alternate having kids with your cousin is a high-priority consideration, but all other things being equal—it might be a thought.

#5: Who Do You Owe?

Debt is a huge factor in determining financial health because it has a strangling effect on your cash flow. The more debt you’ve taken on in the past, the higher your monthly required bills, and the smaller your flexibility in adjusting for new expenses.

A child undoubtedly brings new expenses—one-time expenses for birth and initial expenses, regular pressure on your budget in the form of recurring supplies, and many unexpected expenses that you simply can’t foresee.

Getting out of debt is important, but perhaps never more important than if you’re planning to bring a child into the world.

#6: What’s in the Bank?

One of the primary reasons many people share with me for not having kids is “having no money in the bank.” Compared to the previous problem, this is actually a step up, because it indicates you’re probably on your way to debt repayment and are unwilling to take on more without cash on hand, even for the sake of your child.

It’s a well-founded fear, since an emergency fund, and a larger “baby fund” are essential to managing new expenses without taking on new debt. The size of this new fund is up to the individual family to figure out—based on the expenses expected with birth (depend on health insurance), other one-time expenses, and the amount of cushion you want for unexpected costs.

#7: The Bread Basket

My wife’s family has an interesting saying about kids and money:

“A baby comes carrying a basket of bread under its arm.”

What they’re essentially saying is that babies have a tendency to change our life circumstances to make us better equipped to handle them. They bring in the money and whatever else we need into our lives.

This is a very global “life force/energy” kind of concept that may not be for everyone. I’m much more conservative with financial planning myself. But their point is very good…if you wait around to have a baby because things aren’t “just right,” you might find yourself old and childless before you can blink twice. Sometimes, just sometimes, pulling the trigger is the right decision.

Further Reading

If you’re still unsure about having a baby in the near future, take a look at some of my older posts and get a reality check about how much it really costs to raise a baby—it can be much less than you think! Here’s my recommended reading:

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10 thoughts on “Considering Money in Family Planning

  1. We’ve decided not to have kids until we’re in a better financial state as well. This means eliminating debt (credit cards and at least one car note), money in our savings ($5,000 at the very least, but preferably $10,000) and health insurance (from my husband). This may take a few years so we’re in no rush.

  2. I wish everyone would think about those steps before having children. Children are a responsibility and deserve some financial and other planning.

  3. I would caution couples to also think about the possibility of infertility. Up to ten percent of couples trying to conceive do not do so within a year, then usually requiring medical help to conceive. Fertility declines with age, so if you are in your mid-thirties or older waiting to have children might not make sense.

    1. Excellent point! I guess at that point it becomes a bigger risk (and medical expense) to delay things!

  4. Thank you so much for sharing this! I have been blogging about babies and bucks, trying to figure out how much it costs to have a baby in America these days so hubby and I can save and do it. It seems like this is a topic nobody either knows about or talks about. Your insight is very helpful!

  5. These are all good points – especially health insurance!

    I also like the idea of trying to time kids at the same time as your siblings/cousins so that your kids have more cousins around their own age. I don’t know that I would make that a top priority, but it would be nice for the kids to have more family members the same age as them. Plus if you live close to your cousin/sibling you can trade babysitting nights.

    1. Exactly; plus it’s nice to have all the kids in the family grow up around the same time. I think they would bond better.

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