“When you know, you know.”
“You’ll never be completely ready.”
“You’ll start seeing babies everywhere.”
Do these sound familiar? If you’ve asked your friends and family how they knew they were ready to have children, they might have given you one of these answers.
Everyone “knows” they’re ready for kids in their own way emotionally, so I can’t advise you on that. However, I can share some signs that you’re financially ready to have kids.
YOU HAVE GOOD HEALTH INSURANCE
If you’re thinking about starting a family, quality health insurance is a must. Your child’s health and wellbeing is your responsibility. When they get sick or injured, you have to be prepared for emergency room visits, treatment, aftercare, and all that jazz.
Evaluate your current health care policy to see what changes you have to make when you start having children. Remember that having a baby qualifies you for a Special Enrollment Period, so you can make changes to your health insurance coverage even if open enrollment has ended.
Also, make sure that you have enough to cover both your premium and deductible, paying out of pocket if necessary. Consider switching to your partner’s health insurance plan if it’s a better option for your growing family.
YOU HAVE DECENT PTO AND PARENTAL LEAVE POLICIES
How much time do you want to take off to spend with your newborn? Do you want to take paid time off, sick time, parental leave, unpaid leave, or a mix of all? Check your benefits and leave policies.
Short-term disability insurance pays your salary, or a portion of it, due to medically related needs. What’s paid and coverage time varies by policy. The Family Leave and Medical Act (FMLA) requires most companies to give their employees up to 12 weeks of unpaid family leave time after the birth of their child. Some states have unique family leave acts, and again, the policy can vary in your company. Check your policy to determine what your options are.
YOU CAN SAVE AND MAKE CHANGES TO YOUR SPENDING
No matter what leave policies you have, think about saving up to prepare for your newborn. Once your maternity or paternity leave kicks in, you’re not going to have as much cash flow as before. Add in all your extra baby expenses like diapers and formula and clothing, and you’ll see why you should think about a savings plan ahead of time.
If you need to, are you able to reduce your expenses or move around your funds? What lifestyle changes can you make now to boost your savings for the baby? Maybe you cook more at home instead of going out to eat, or stick to weekend road trips instead of more expensive vacations.
A good rule of thumb is to save up for as many months as you plan to take off, plus a separate emergency fund. Babies can incur unexpected medical expenses that you don’t plan for or even think about. Sure, you might be prepared for your little one to arrive early, but what if your hospital stay is longer than expected? What if you have an unplanned cesarean section? Every item or service used for labor and delivery is an individual expense. Your emergency fund can save you a lot of stress if you need to use it.
YOU HAVE A PLAN FOR CHILDCARE
Childcare costs depend on where you live and what you need, but it’s still one of the biggest expenses families face in the United States. At the lower end of the spectrum, childcare can cost around $6,000 annually in states like Alabama, South Dakota, or Kentucky. At the higher end, childcare can cost over $20,000 per year in places like Washington D.C. and Massachusetts.
Research options in your area. Discuss with your partner what childcare you’ll need, how your income and cash flow will change after the baby arrives, and what type of care you can afford. This is a great opportunity to use a budgeting system to see where your money is going and how your budget will differ with a newborn.
YOU HIGHLY VALUE HAVING A FAMILY
Yes, wanting a family does advise whether or not you can afford one! Remember that what you value affects how you spend your money. If you value having your own child, raising kids in a stable environment, and making new memories by raising your own children, then those are your money values.
HAVING KIDS ISN’T ALWAYS ABOUT MONEY — IT’S ABOUT VALUES
In our society, we often assume that money should be “figured out” before having kids. But the truth is, that’s not always the case. Just like sometimes people don’t have all the money they need before starting a business, or buying a house. If it’s important to you, we at Everyday Money believe you’ll find a way to make it work. We also believe that spending your money in alignment with your values will make you and your family happy. If you have to tweak your current habits or financial goals to make it work, it’ll be worth it.