Matt from Mom and Dad Money and I decided it would be fun to trade blogs for the day. I have a guest post about health insurance on his page and below is a great post from him below about things to consider when expecting a baby.
Matt Becker is a proud father and husband and his site Mom and Dad Money is dedicated to helping new parents build financial security for their family. You can also find him on Twitter and Google+.
Deciding to have a baby is scary. Growing up I always knew I wanted kids, but it’s one thing to feel like you want to have kids “one day”. It’s much different when you’re trying to decide whether you’re ready to do it right now. And while there are certainly a lot of positive emotions around the decision, I have to admit that fear was one of the biggest for me.
I was scared about a lot of things. I was scared that I wouldn’t know what to do. I was scared that I wouldn’t set a good example. But most of all, I was scared that I wouldn’t be able to support my family financially.
Having a baby is a huge financial change. All of a sudden you have a tiny little person who is completely dependent on you being able to care for him or her. And while I think parenthood is incredibly rewarding, it’s not something that should be entered into without a full understanding of the financial requirements. So today I’d like to walk through some of those requirements in the hope that it helps you think things through when the time comes.
Babies need lots of stuff
The word “need” can be pretty subjective, especially when it comes to buying stuff for your first child. But the reality is that there isn’t a huge list of things that babies truly need. As long as you have a crib, a car seat, diapers, wipes and some clothes, your baby has all it really “needs” in order to survive those first few months.
But of course most new parents don’t stop at that bare-bones list of essentials. We certainly didn’t. There’s a stroller, a changing table and/or dresser, a diaper pail, monitors, blankets, towels, wash cloths, bottles, toys, books, that perfect rug for the nursery and of course a cute little bunny outfit so you can dress him up for Easter. Maybe you have to move to a bigger place. Maybe that two-seat sports car doesn’t make much sense anymore. Really this list could go on and on.
The point here is that you’re probably like the rest of us and will spend a good amount of money on new stuff for your baby, some of which you will only barely or never use. You might get some gifts from friends and family, but just these basic start-up costs can run you anywhere from several hundred to several thousand dollars, depending on what end of the price spectrum you shop and how much you actually buy. Since you definitely don’t want to start your life as a new parent by piling on a bunch of new debt, you need to make sure that you have adequate savings or cash flow to be able to afford all of it.
Babycenter.com, my favorite place for baby information, has two great tools that helped me think about how much having a child would cost. They are well worth checking out:
1. Cost of Raising a Child
2. First-Year Baby Costs Calculator
Wills and insurance
Ahh, the fun part of being a parent. No one likes to talk about death or insurance, but they are both unfortunately necessary topics for new parents.
Basic estate planning is absolutely essential. At the very least you need a will so that you can appoint guardians for you new baby if both parents were to die. The cost of a will can range from $0 if you handwrite it yourself (not recommended, and also not allowed in all states) to several hundred if you pay an attorney to help you out. We went with an attorney because we wanted to make sure we did everything right.
Insurance is another huge part of providing financial security for your family. Good term life insurance is a must for almost all new parents. Long-term disability insurance is critical to protect your ability to earn money. Then there’s health insurance, auto insurance and liability insurance. It all costs money, and none of it is fun to pay for, but if you’re serious about raising a child in a stable financial environment then it’s well worth the cost.
Your lifestyle will change
It only makes sense to assume that your lifestyle will change as a result of having a child. But what does that actually mean?
First, there’s definitely less going out. Not only are you less likely to be able to afford the nights out as regularly as before, but the fact is that having a child is exhausting. I’m not ashamed to admit that during my son’s first year, my dream Friday night was an early bedtime without any middle-of-the-night wake ups. I was much more likely to be up at midnight trying to rock him back to sleep than out on the town living it up. You might be okay with this or you might not. But expect it to happen.
Second, your friendships will change. Unless your friends are also having kids or already have them, it’s going to be tough for them to relate. Our friends have all been great about everything, but there’s a simple reality that our lives are different now. We have different things that we worry about, different daily routines, and different life priorities. I certainly haven’t lost any friends because of having a child, but those friendships are different, and some of them are a little less close. It’s a natural part of life that our relationships will change over time anyways, but a baby can definitely speed some of those changes up.
Summary
I think parenthood is awesome. My wife and I have loved it so much that we’ve decided to do it again. But there are real costs involved, both financial and otherwise, and it’s important to understand what they are going in. As with anything else, having full knowledge of what to expect helps you make the decision when you’re truly ready, which will only make it more enjoyable.
Are planning on having children? What are your biggest financial worries? If you already have kids, what have you found to be the most significant financial impact?
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