How much do you really need to save before having a baby?
It is no secret that raising a child can be expensive. Having a child is one of the most rewarding experiences of a lifetime, but you need to have a financial plan to help reduce the stress that comes with the expenses of raising a child.
The average cost of raising a child in the United States is $233,610 dollars. Take a moment to catch your breath and stick with us here. It is not as bad as you might think. This is the total amount on average it takes to raise a child from birth until they are 18 years old. You do not need to save this much in advance or take out a loan if you find out you are pregnant. But, you do need a plan that can help you cover all of the costs you encounter on your parenthood journey and to help prepare a bright future for your family.
Take a look below for some tips that can help you financially prepare for parenthood.
Pay off your debts
Do you have a high amount of debt, such as student loans, car loans, credit card bills or a mortgage payment? It is likely not possible to fully eliminate your debt before having a child, but you should try to reduce your debt as much as possible. For example, paying off debt that has high interest and no tax-deductible benefits, such as credit card debt, should be a high priority before having a child.
Save for your missed time of work
Many employers offer options for maternity leave. This looks different from workplace to workplace, so make sure you are familiar with your maternity leave option and save up enough to cover the difference.
For example, if your company pays 60% of your wages during maternity leave and your annual net salary is $60,000 dollars, you will earn $3,000 per month during your leave instead of $5,000. Try to save up the difference for the amount of time you plan on being on leave to continue living at the same level as you were prior to taking leave.
Save 10% of your income
You should aim to set aside 10% of your income to invest in your child’s future. Take a look at all of your expenses, including how much you invest in retirement, and consider how it would affect you to set aside an additional 10% in savings for your child. If this amount is too much of a strain on your finances, you should consider waiting or making changes to your lifestyle, such as eating out less, to help accommodate for the difference.
Talk to a ProVise CFP® professional about financial planning for new parents
Are you a young professional who is getting ready to start a family? Having a child without a financial plan is like going on a hike without a map of the trail. You are strong enough to get through the journey, but without guidance, you can get lost or stuck. At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can act as your guide to help you navigate the financial hurdles of parenthood.
Many of our team members are familiar with the challenges of parenthood. We can work closely with you to understand your financial circumstances, the challenges of parenthood, your goals, risk tolerance and personal values to help develop and maintain a financial strategy that works for you.
We can create a written plan for you at a fiduciary standard of care. All of our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about your financial planning for young professionals who are starting a family? Contact ProVise today to schedule a complimentary consultation.
