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Peter ColisForbes CouncilForbes Finance CouncilCommunityVoice
POST WRITTEN BY
Peter Colis
CEO and Co-Founder of Ethos, a new kind of digital life insurance company which makes simple and ethical insurance for families.
Starting a family is an exciting time. However, it is also one of the most drastic financial changes in a person's life. A new baby also welcomes a string of new medical expenses, an uptick in utility bills and a few additional items on your grocery list — meaning your month-to-month budget will change almost immediately. Understanding the financial aspect of starting a family from the outset is a key aspect of ensuring your loved ones are taken care of in both the short and long term. In order to take a few things off your plate, we compiled a list of four important financial decisions parents need to make before the arrival of their newest family members.
Make a realistic budget.
Raising a child isn’t cheap — in fact, from birth to their seventeenth birthday it’s estimated that raising a child will cost roughly $233,610per child in the U.S. If you have more than one child, that amount jumps quickly. Acknowledging this will lead to your first step as new parents: setting a realistic budget. Before you start decorating the nursery or filling out your online registry, it’s crucial that you monitor your spending, cut splurges where you can and anticipate new expenses. It’s one thing to track spending habits when it’s just the two of you, but the addition of a child will completely upend your typical spending habits.
As you welcome a new family member, set a realistic budget that reflects not only the change in your lifestyle but also your needs. It’s important to account for the everyday expenses that will likely increase due to your new plus-one, including housing, groceries, and other home expenses. Even though the first few months of sticking to a budget are difficult, it’s important to keep at it. After the arrival of your new baby, take an audit of where your spending increased and where it didn’t, and adjust from there. Eventually, your budget will feel like second nature.
Set up an ‘in case of emergencies’ savings account.
After you adjust your monthly budget, you’ll want to also create a savings account for emergencies. Life is unpredictable, and if an unexpected accident occurs that leaves you unable to work or causes you or your partner to lose a job, having an emergency fund can help curb the initial shock. While you may already have a savings account in place, bringing a child into the world means you are responsible for not only yourself but a person who is completely reliant on you. What’s in your personal rainy-day fund may not be enough to cover the entirety of your expenses.
Financial experts recommend that families have at least six months’ worth of living expenses saved. This savings account will serve as a critical cushion, making any unexpected events manageable in a period that is already stressful enough.
