A Financial Perspective: When is the Right Time to Have a Baby?

When is the right time to have a baby? That’s a big and important question and there’s more than one way to answer it.

At Addition Financial, we focus on the financial aspects of having a baby. There’s no question that adding to your family is a big decision that will impact your financial picture. You’ll need to consider everything from your taxes to when to open a college savings account for your child.

If you’re wondering when to have a baby, here are the financial boxes to check to figure out when it’s the right time.

You Have Medical and Short-Term Disability Insurance

One of the first financial hurdles to leap when you’re thinking about having a baby is your insurance. Do you have insurance? Will it cover pregnancy-related expenses?

The costs of prenatal care can add up quickly without insurance. You’ll need regular doctor visits, prescription prenatal vitamins, and – of course – emergency care available in case you need it.

If you don’t have good insurance, it’s worth shopping around to get what you need (and make sure you can afford it) before you have a baby. It’s also a good idea to check out your short-term disability insurance with your employer to see if you can get paid time off for maternity leave. Florida does not mandate that employers offer maternity leave. Before you have a family, you may want to purchase a short-term disability insurance policy for yourself.

You Have Stable Income

The next thing to consider is your job and income stability. Babies come with lots of unanticipated expenses. The more stable your financial situation is, the easier it’ll be to take on the financial responsibilities of having a baby.

The amount of steady income you’ll need can vary widely depending on where you live. The key is to be sure you’ve minimized the risk of losing your income or not having enough to cover your expenses and the baby’s.

You Have an Emergency Fund in Place

Do you have enough money set aside to cover your expenses for at least three months? If not, you may want to hold off on having a baby until you do.

We recommend stashing away six months of necessary expenses. Your total should include:

• Rent or mortgage payments
• Insurance premiums
• Gas & transportation
• Groceries
• Utilities

The emergency fund is a must because it’ll help you cope with unexpected expenses and life changes, such as losing a job.

You Have Started a Retirement Fund

Retirement isn’t something you might normally worry about when you’re young and just starting a family, but it should be. Starting a retirement fund early means that you’ll have a jump start on your future. It also means your kids won’t need to worry about supporting you when you’re older.

You don’t need to have enough saved for retirement before you have kids – that’s not a realistic goal. However, you should have some long-term investments and a good mix of risk in your portfolio. Then, you can add to it as needed knowing you’re off to a good start.

You Have the Means to Start a College Fund

The rising cost of a college education is something that should be a concern to every young parent. If you’re still paying your student loans, you know the financial burden of a good education is not something you can ignore.

That’s why your financial calculations about when to have a baby should include a look at how you’ll pay for your child’s education when the time comes. Ideally, you’ll be making enough money that you can afford to set up a college fund now and have a significant amount by the time your child’s applying to colleges.

You can figure out how much you need to save using our free college calculator, here.

You Have a Plan for Childcare

Will you keep working after you have a baby? The choice of whether to be a stay-at-home parent or put your child in daycare is one that looms large for parents. Many couples need two incomes – and if you do, then you’ll need to make sure you have enough money to pay for childcare.

Maybe you’re lucky enough to have a parent or family member nearby who’s willing to look after your baby while you work. But if you don’t, you’ll need to figure out how much money you need for daycare and if it’s something you’ll be able to afford once your baby arrives.

You Understand How Having a Baby Will Affect Your Taxes

Finally, you should understand what having a baby now is going to do to your taxes. Here are some pointers:

• You’ll need a Social Security Number for your baby to claim them as a dependent on your taxes
• You may be eligible to take the Child Tax Credit
• If you’re a single parent, you may be able to file as Head of Household
• At work, change your withholding to reflect that you now have a new dependent
• If you’re paying for daycare, you might be able to take the child care credit

You may want to consider consulting with an accountant to be sure you’re prepared before filing your taxes.

Figuring out when to have a baby isn’t easy, but the tips we’ve provided here will ensure that you’re on the right path and have the financial resources you need to grow your family.

Need help with the financial aspects of family planning? Click here to learn how Addition Financial can help!