About the Episode
Starting a family is a huge, exciting life milestone. In Part I of our Money + Kids mini series, hosts Cristina and Will learn all the financial considerations that should be covered before having a child. They are joined by John Stanton and Stefanie Flohr, financial advisors at CUNA Brokerage Services, who help listeners learn how to balance budgeting as a parent while saving up for your child's college education along the way. From grocery bills to insurance payments, learn how to financially prepare for starting a family by listening now!
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4:55
Will asks Question 1: “Let’s start with the cost of raising kids: $233,610 works out to about $13,000 per year if you assume parents are paying for kids until they’re 18. What is the most expensive aspect of raising kids?”
John responds: “All of it, but mostly childcare. It’s really hard to meet that need when you’re starting out as a young professional with a fixed income. Even if you don’t use childcare services, having one spouse stay at home and taking care of the child can also impact your income. Childcare is the most expensive part of raising kids until they attend school.”
Stefanie follows up with: “I agree with John. Currently, my kids have been in daycare for a couple of years due to our recent job changes. Even though we’ve lived in a few different cities, the cost of childcare has always been the same. Not many people realize that the cost of childcare for an infant is much more than a three year old. Childcare gets cheaper as your child ages, but I’m not sure if that cheaper ten dollar rate is going to do much for your bank account. On top of that, some childcare places provide diapers, while some don’t. Diapers are a huge expense which can also add to the price of some childcare services.”
Learn more: What's the Average Cost of Having a Baby in 2021?
8:45
Cristina asks Question 2: “One thing that strikes me as the parent of two kids is that these numbers don’t include the cost of college. When and how should parents start saving up for college for their kids?”
Stefanie responds: “The moment your child has a social security number, you should start saving up for their college education. That’s one reason why we strongly recommend parents open up a college savings account as early as possible. Putting away even a relatively small amount of money each month can make a huge difference when your child heads to college. Another great way to save money is by allocating your child’s daycare money into their college savings account after your child is finished with daycare.”
Learn more: High School Hacks: How to Pay for College Tuition Without Loans
10:55
Will asks Question 3: “What do you suggest people do financially before they grow their family?”
John responds: “You have to budget, and you have to be realistic with your budget. What you’re spending now is not going to be the same when you have your first child. You need to be real with yourself about your current debt, income and liabilities when it comes to creating a realistic budget. You’ll also need to account for your child’s ability to get a scholarship and if they’re going to attend college.”
Learn more: A Financial Perspective: When is the Right Time to Have a Baby?
12:35
Cristina asks Question 4: “What type of things should we save money for when we start planning on having kids, or how should we save?”
Stefanie responds: “You should start saving up for the essentials in a savings account. One thing that many people don’t think about is maternity leave. Nationally speaking, women don’t get paid for maternity leave. Most of the companies I’ve worked for have offered short-term disability leave for new mothers (which is such a gift), but short-term disability insurance only covers up to 60% of your salary. Therefore, you have to make a decision between not having a salary for 12 weeks or having 60% of your salary up to 12 weeks. That’s why we recommend saving up as much money as you can for maternity leave before you get pregnant. You can also purchase short-term disability leave outside of your employer.”
“To sum it up, you should save ahead of time, plan how many weeks you’re going to take off and plan for the weeks where you won’t have a salary. Another thing most people don’t realize is that you must pay for health insurance benefits if you were the carrier of your child. You are obligated to cut a check to your employer if you’re not getting a paycheck in order to keep your health care. So remember, health care comes out of your paycheck. If you’re not getting a paycheck but you’re still employed by FMLA, you still have to pay for your healthcare somehow.”
Learn more: How to Start an Emergency Fund and Set Savings Goals
16:10
Cristina asks Question 5: “Is there a specific type of savings account that we should put our money in that’s better than others?”
John responds: “I would say the one that’s driven by the highest interest. If you don’t have enough saved, you want to make sure your money is always liquid and available. A short-term CD might be the way to go since you won’t be penalized too hard if it’s paying more than your savings. However, you should never invest any crucial money that you’ll need in the future . You don’t want that money to be tied up in any long-term investment or long-term vehicle when you’ll need it in the long run.”
Learn more: When & How to Start Contributing to a Child Savings Account
17:10
Will asks Question 6: “How soon after they have a baby should couples revise their wills and other legal documents?”
Stefanie responds: “As soon as possible. You have to think about who will take care of your child if you and your spouse pass away together. Decide if this person will be a family member or not and think about how they will take care of your children. Think about how you’re going to fund your child’s future.”
“After I got back from maternity leave with my son, I immediately got more life insurance. Ask yourself if you can replace the income that you were bringing in for your spouse in the event of an accident. Even if you are a stay-at-home mom, you need life insurance to help pay for the cost of raising your children. Estate planning is something many people don’t want to think about, but it’s so important to plan beforehand.”
Learn more: Real Talk: Why You Need an Estate Plan in 2021
20:15
Will asks Question 7: “What are some of the tax breaks that people can receive after they have children?”
John responds: “There are tax credits for children of course and you also have the write off for daycare expenses. I highly recommend having an accountant to help you take advantage of all those benefits.”
Stefanie follows up with: “I personally use a dependent care account. It includes your pre-tax dollars, and many employers currently offer it as an option. For example, you can use your pre-tax dollars to pay for daycare costs.”
23:40
Cristina asks Quick Question 1: “Do you think parents with kids should have a budget?”
Stefanie responds: “Absolutely! Budgeting is a good idea for everybody. It can be difficult to predict expenses for kids but having a framework can help you keep spending under control and save money wherever possible.”
Learn more: A Household Budget: Average Monthly Expenses for Family of 5
24:40
Cristina asks Quick Question 2: “And just for fun, since you both have kids: what was the biggest unexpected expense you have had as a parent?”
Stefanie responds: “The first unexpected expense would probably be shoes. Kids outgrow shoes so quickly. Another expense would be entertainment since you don’t stay home with your children all the time. Most age appropriate activities for children involve a membership of some sort or a ticket to get into some place.”
25:35
Will asks Quick Question 3: “You mentioned parents getting life insurance for themselves. Should people buy life insurance for their kids?"
John responds: “Not to be morbid since mortality is a taboo subject, but I think getting life insurance for a burial is a practical idea. The chances are you’ll never need it, but having a life insurance policy can cover funeral expenses if they’re necessary. The best bet is a term policy that lasts until your child comes of age.
26:10
Will asks Quick Question 4: “Now, to end on a lighter note. What surprised you the most financially about becoming a parent?”
John responds: “So my daughter was actually born on my birthday, and it was the best birthday gift I ever received but I’m still paying for her to this day – and she’s 28. For me, the hardest part was saying no sometimes. Now that our kids are older, we want them to focus on earning money instead of being spoiled by us. For anyone with kids under the age of 20, you definitely want to set an example of working hard so your children can learn how to be financially independent in the future.”
32:35
Need practical advice when getting married and starting a family? Look no further. In this episode we shared The Principal Guide to Achieving Financial Security When Settling Down – it’s an overview of all the financial aspects of starting and growing your family. By the time you’ve finished reading, you’ll understand what you need to do to achieve the financial security you want for yourself and your family.
Posted on Mar 30, 2021
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