How to Know if You’re (Financially) Ready for Kids

Deciding to start a family is a big decision that comes with a lot of responsibility.

So, how do you know when you are financially ready to have kids? Unfortunately, there is no magic number, but here are some questions you should ask yourself before taking the leap into parenthood that will help you determine whether it’s the right time to start a family.

Do I understand the costs of child care?

It’s about more than just diapers and baby food. Raising kids is not cheap! Make sure to consider expenses now and in the future, such as daycare, toys, clothes, medical costs, after-school activities, school supplies, larger grocery bills, birthdays, and a host of other things. Be sure to crunch numbers to ensure that your finances can handle all that comes with having kids and raising a family.

What kind of debt do I have?

It is likely you’ll embark on parenthood with some form of debt, whether it be a car loan, a mortgage, or student loans. That’s ok! As long as it’s manageable, it’s ok to have kids and debt. Where you’ll want to be careful is if you already find yourself having trouble keeping up with payments.

To help you assess whether your finances are ready for kids, take some time to sit down with all your documentation for your bank accounts, credit cards, loans, and investments. Review your budget and decide whether you can afford the costs of child care and pay down your debts. Putting off paying high interest debt is not in your best interest as it will only cost you more in the long run and prevent you from working towards other financial goals. Consider trying to pay off some of your debts before having kids to leave a little more wiggle room in your budget once a baby is in the picture.

Have I saved for retirement?

Though your kids will no doubt become your priority in life, it is still important to ensure you take care of yourself. It is never wise to sacrifice your financial well-being for the sake of your family. Before having kids, it is important you have a good start on your retirement fund and that you make a plan to continue to make contributions on a monthly basis. Neglecting your financial future will only hurt both you and your family down the road.

Before having kids, review your monthly budget and make sure you have a line item for retirement contributions and treat it like rent – pay it at the beginning of every month so you are not tempted to spend it elsewhere.

Do I have an emergency fund?

Like a retirement fund, it is important to maintain a solid emergency fund. You’ll want to ensure you build monthly contributions into your budget so that when life takes an unexpected turn – like needing to pay for home repairs and medical bills – you are financially prepared and can minimize the negative impact on your family.

Do I have a stable income?

For the sake of your family, it is important to ensure you feel comfortable in where you are at in your career. If you’ve had difficulty holding down a job or are transitioning to a new career, it may be wise to wait until you feel more certain in the stability of your income. The last thing you want is to have a baby on the way and suddenly find yourself let go from a job or recovering from a failed entrepreneurial venture. And remember, variable income does not equal unstable income! If you’re thinking of having kids, consider whether you’ve had a steady income for more than 12 months and have 3-6 months’ worth of living expenses in your emergency fund just in case.

Am I adequately insured?

Not having proper insurance policies in place – whether it be car, home, medical, or otherwise – can leave your family in financial ruin. Most immediately, you’ll want to make sure you understand what is and isn’t covered for hospital costs during delivery (and the possibility of unforeseen medical emergencies or conditions affecting you or your baby).

Do I have a will?

God forbid something should happen to you, you’ll want to ensure you have a plan for your assets and that your family will not face financial hardship. A will determines who receives your assets and who will be appointed the sole caregiver of your kids.

What will I be sacrificing?

Raising kids always comes with a certain amount of sacrifice – sleep, time, social life – but be sure to also consider what financial goals you may have to sacrifice. If you are planning to start a family, keep in mind that you may not be able to afford to travel as often, renovate the kitchen of your dreams, or retire early. Assess your financial goals and whether you are willing to put some of those on hold for the sake of your family. If they are not something you are willing to give up, now may not be the time for you to have kids.

Do I plan to pay for my child’s education?

This may not be something you can answer right away, but it is still worth considering. If paying for all or part of your kids’ post-secondary education is important to you, consider whether you can afford to save for this expense and how you plan to do so. It is important you do not sacrifice your retirement or emergency fund to pay for college, so if this is not something you can start saving for right away, make a plan to start incorporating college fund contributions down the road.

There are many things to consider when deciding to have kids! These questions are not meant to scare or discourage you from having kids. Instead, we want to ensure you have made the proper financial considerations so you can minimize the stress of raising a family and ensure you, your kids and your finances are well taken care of!

Did you have any financial surprises when you had kids? What do you wish you had planned better for? Comment below!

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