Want Kids But Can’t Afford It? Make These 5 Money Moves
Written by
Nicole Spector
Edited by
Ashleigh Ray
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Parenthood is the dream of many Americans. But many, especially younger adults, are concerned that they won’t be able to financially cover the journey.
It’s a valid concern. According to the Institute for Family Studies, which cited data from the USDA, a middle-income family of four can expect to shell out $233,610 per child from birth to age 18. This number climbs to $310,605 when calculated using an adjusted inflation rate for 2022 of 4%.
Still, there are a number of adults looking to expand their families — even if it means cutting back on non-essential costs to take on new essential ones. GOBankingRates spoke with Dave Fortin, a chartered financial analyst (CFA) and portfolio manager as well as the co-founder and COO of FutureMoney, and asked for his advice to wannabe parents.
Here are the money moves he suggested you make if you really want children and need to prepare your finances.
Reevaluate Your Lifestyle (and Prepare To Cut Major Costs)
In order to comfortably raise children in the future, you need to figure out where you stand now financially and consider what cuts to your lifestyle will be necessary once you have kids.
And be prepared for the fact that the cuts you make to your personal budget may not be enough to cover the cost of being a parent. In other words, if you’re on a tight budget, unsubscribing from Netflix probably won’t be enough.
You may need to take more drastic measures.
“Consider whether a move to an area with a lower cost of living will allow you to maintain better financial health as you grow your family,” Fortin said.
Also, he added, “Consider whether you can lower your cost of transportation as well. While that new car smell is exciting, you can typically find a much better deal financially on a used vehicle.”
Start Saving as Soon as You Decide To Have Kids
If you’re planning to have children, you need more than just retirement savings and an emergency fund; you also need a parenthood fund.
“Build a financial cushion to cover unexpected costs related to parenthood,” Fortin advised. “You will have greater peace of mind and reduce your likelihood of going into debt. Once you have three to six months of expenses saved, you can start planning for the longer term.”
And remember the earlier you start saving, the more time your money has to grow through compound interest and investment returns.
Contribute to a 529 Plan
If you already have a good amount of savings set aside for your kids and have room to invest more in their upbringing, Fortin recommended contributing to a 529 plan for their education.
As previously reported by GOBankingRates, these tax-advantaged account offers several benefits, including tax-free growth and withdrawals for qualified education costs like college tuition, K-12 tuition and apprenticeship programs.
Know the Financial Help Available to You
Be curious and explore the financial help that is out there for parents.
“Research available government assistance programs for families with children, such as tax credits or child care subsidies,” suggested Fortin. “Take advantage of any employer-sponsored benefits, such as flexible spending accounts or child care reimbursement.”
Tap Your Family and Friends Network for Help, Too
As his final piece of advice, Fortin said, “… depending on your situation, your family and friends can be an excellent source of hand-me-down items for kids, babysitting, child care, baby shower gifts or financial contributions to you and your kids.”
Remember not to overlook those closest to you when you need a hand.
Taking these five steps will help ensure you’re able to financially support your growing family. And if you’re still looking for help getting your finances in order, try speaking with a financial advisor.
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