Our Thoughts

How to Financially Plan for Having Kids

By: Alan Ness

They say if you wait to have children until you’re financially stable, you’ll never have them. The US Department of Agriculture (USDA) estimates the average cost of raising one child from birth to age 17 to be over $230,000. It’s likely to be considerably higher if you’re living in the DC Metro of another urban area. Hopefully, the prior three sentences haven’t replaced your feelings of happiness with dread. 

Finances aside, parenthood is one of the most rewarding experiences in life. As you and your significant other approach this journey together, we have created a list of 6 areas to focus on to make sure you are financially ready to embark.

1) Have an Adult Conversation

Communication is the key to a successful marriage/partnership and successful parenting. Do yourself a favor and have an honest discussion with your significant other about parenting expectations. What would your ideal parenting experience be? Are there childhood memories you hope for your child to experience as well? How we were raised can have a significant impact on how we want to raise our children. Is there an expectation that one parent will stay home to raise children? Do you have your heart set on private school? Enter this conversation with an open mind and suspend judgment. Use it as an opportunity to discover more about your spouse. 

2) Check Your Benefits

Understand your company’s leave policy and enrollment options during a life-changing situation. Do they offer paid maternity/paternity leave? Is there assistance for adoption and/or fertility treatment? Do your homework because you never know what curve balls life may throw.


While evaluating your benefits, confirm if you have a short-term disability policy. In the event of a C-section, you may be entitled to claim benefits due to a medical procedure.  

The Family and Medical Leave Act (FMLA) guarantees 12 weeks of unpaid leave following the natural birth of adoption of a child but do your homework before banking on FMLA. Not all employers and employees are covered. 

In addition to time off for childbirth, be mindful of allocating paid-time-off (PTO) for sick days. If you plan on your child attending a daycare facility, they will be exposed to more germs. While good for developing a rock-solid immune system, you can expect to be home with your little one while you both recover. 

3) Choose a Childcare Option

The DC Metro area makes the list as one of the LEAST affordable regions in the country for childcare. Daycare facility costs can range from $12,000 to more than $24,000 per year. This also means affordable options for childcare are competitive. Begin evaluating your options and apply to waitlists as soon as possible. Despite long lists, don’t get discouraged. Sometimes you can score an open spot if another family ahead of you isn’t ready or has found another daycare option.  

4) Create a Budget

The dreaded “B” word –when people hear the word budget, it resonates almost like a punishment. Before you have a child, make sure you outline your family’s cash flow to ensure you can meet your goals. There are only two places in your budget that funds for children will come from. Sacrificed savings or a reduction in discretionary spending. Make sure you enter parenthood with eyes wide open regarding your finances. If sacrifices need to be made, make them on your terms. Be sure to incorporate the cost of childcare, increases in insurance (health, life insurance, etc.), and college savings. Once you have developed a post-baby budget, try a dry run. You can direct additional expenses to savings. You’ll thank yourself later. 

5) Establish the BIG 3: An Emergency Fund, Adequate Insurance, and Basic Estate Documents

Making sure you have contingency plans like an adequate emergency fund and insurance goes hand in hand with your planned little bundle of joy and responsibility. Once you have a firm grasp on what your expenses will be, make sure you have 3-6 months of expenses in savings, or begin working toward it. Now that you will have another mouth to feed, you must have enough cash reserves to cover costs in the event of job loss or another emergency. 

Those other unforeseen events could be death or disability and thus life insurance and protection of your income from a disability are new priorities. Obtaining adequate insurance coverage keeps your beautiful dreams for your child intact despite a tragedy. 

Getting a set of basic estate documents is also part of the package now. Read about the 4. 

6) Start Saving Early

Saving-EarlyCollege tuition isn’t getting any more affordable. Start saving now for your little one’s college education to enjoy the benefits of compound growth. 529 plans are a great option, and you may also be able to qualify for a state income tax deduction on contributions up to a certain level (if you participate in your state’s sponsored 529 plan). Read more for each state’s specifics. If you aren’t investment savvy, choose an age-based portfolio.  Most plans offer them, and they will automatically adjust the investment allocation based upon your child’s age, becoming more conservative as they approach college. 

While we all want to create the best life possible for our children, remember to pay yourself first.  Be sure you don’t sacrifice your own financial security to pay for 100% of your child’s education costs.  You can take out loans for college, but you can’t take out a loan for retirement. It’s a balancing act.