How Much Do You Need to Save Before Having Children?

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money saved before babyIf we’re being honest, I think we can agree that no one has kids for the financial benefits. They simply aren’t a reliable return on investment. On the other hand, kids provide spiritual, emotional, and developmental benefits. Just don’t expect to have a lot of spare money lying around.

The average American child costs more than $240,000 to raise to the age of 18. So if you’re in the process of deciding whether or not you’re ready to have kids, it’s worth doing a little financial homework to make sure you’re in the best shape possible. Here’s a thoughtful checklist to see how much you need to save before having children.

Building Reasonable Savings

It’s easy to look at a big number like $240,000 and think there’s no way you’ll ever be able to save enough. But it’s important to look at the daily and monthly picture rather than the 18-year picture.

To make sure you’re prepared for life’s emergencies and the monthly costs of raising a child, experts agree that you should have 3-6 months of savings in a liquid savings account.

So take a look at your situation: do you struggle to maintain an emergency fund like the majority of Americans? How much do you think you could save before you have a child? Make sure it’s in this range of 3-6 months of your cost of living to provide a secure home environment for a child.

Considering Your Assets

Not everyone has their whole new worth in the form of a savings account or a retirement account. It’s also important to be building a portfolio of assets that can grow over time as your family grows with as little daily maintenance and worry as possible.

For example, if you have stocks, bonds, real estate, or other investments, tally those up inside your net worth and see where that puts you, financially. Evaluate what you have, what you plan to have, and how those costs will figure into your net worth over time.

If you don’t have any investable assets, the time to change that situation is now. Look into researching a few options and see if you can invest in growing your portfolio before you grow your family. That way you can reap the rewards that come with investing early, compounded interest, and take some financial pressure off of your future self.

Evaluating Potential Income

The process and experience of having a child is all about building a future for your family. The same goes with the process and experience of preparing your finances for having a child; it’s not just about what you have right now but about what you will have in the future and as time passes.

When you evaluate your current financial situation, take a look at the future, too. You should take into account the potential future income you will be able to earn. In many industries, the more experienced you are, the more you’ll be able to charge for your services and your position. That means your earning power will rise over time, making that $240,000 seem less and less of a financial iceberg.

Understanding Needs and Wants

Another important factor to keep in mind is that once you have children, your needs and wants are likely to change drastically. Things that seemed important or worth the cost may not seem so important or worthwhile as they did before. This goes for anything from fancy dinners out to vacations across the country.

While your child-related costs may increase, your childless-costs may decrease too, evening out some of those costs. Having a better understanding of your needs and wants as they are now may help you identify places within your budget that can be decreased accordingly.

At the end of the day, there’s no such thing as “enough” when it comes to raising kids. Emergencies and accidents happen, costing you more money than you thought you’d need in the first place. On the other hand, your child might also surprise you with how little you need compared to what you planned for.

At the end of the day, you need to be able to cover your rent and financial responsibilities while saving a little for the future — and a little one adds to those responsibilities. Take a good hard look at your current level of savings, try to build your assets as much as possible, and keep your future earning potential in mind.

Author Bio: Rich Ellinger is a serial software entrepreneur with a passion for investing. His latest company, Wealthminder, strives to help do-it-yourself investors create a workable financial plan and then marry that plan to a sensible investing strategy, all online. You can read more of his work at The Enlightened Investor.


Image via Meagan




*This post was featured on Momma Makes Cents, Business Action for Water and Aspiring Blogger.

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  1. Having children is an impossibility for me at this point in my life because every thing is still completely unpredictable and unstable. My entire adulthood has been about seizing opportunities at a moments notice and shipping off halfway across the world for months at a time to make money that will last me till the next time I get a job, whenever that will be. That’s not really a lifestyle that lends itself to children.
    Stefanie @ The Broke and Beautiful Life recently posted…5 Reasons EVERYONE Should Take An Acting ClassMy Profile

  2. I don’t think there is really a set amount that you need to save to prepare for kids. You’ll never really know how much you need. But I agree that it’s a good idea to have an emergency fund saved up for the unexpected. Also, I find that kids aren’t nearly as expensive as most people claim. If you buy what you “need” used and then sell it when you are done, you will save a lot.
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  3. Planning on whether you can afford a bundle of joy or two is a personal decision, but having a good idea of the general costs can prove helpful. From diapers to child care to teen-age braces, middle-income parents can expect to pay more than $200,000 in expenses for one child over a period of 17 years, and a sizable portion of the spending starts in the first year.
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