How to know if you're financially ready to start a family
It’s no secret: raising a child can be expensive—sometimes overwhelmingly so. A few years back, a well-publicized report estimated that American parents would spend an average of $233,610 raising a child.
A more recent survey found that families spend about $22,000 on child-related expenses like daycare and diapers during their baby’s first year alone. Not only that, but parents typically underestimate these costs by 37%. It’s no surprise, then, that more adults are opting not to have children, with 36% citing affordability as a major factor in their decision.
While these numbers may seem intimidating, it's important to remember that there's no precise price tag for raising a child. At the same time, the costs aren't an unsolvable mystery either. If financial concerns are making you doubt your readiness for parenthood, taking a closer look at the numbers might help clarify things.
There’s no one-size-fits-all answer, and it’s not just about saving or earning “enough” money. Rather than focusing on hitting a certain number, consider planning out expenses and considering potential lifestyle changes.
Consider Your Timeline for Starting a Family
Understanding your timeline can help you work backwards to figure out what adjustments you need to make. Some may prioritize finances or career goals, while others might be ready to have children sooner. Some may also consider fertility options like freezing eggs or IVF. If you’re unsure about your timeline, that’s fine, too—but having a general idea can help get the planning started.
An important warning: Don't be fooled into thinking homeownership is a prerequisite for having a baby. Buying a home as a requirement to starting a family is one of the biggest myths, when it comes to family planning. If anything, it’s better to wait. Life as a parent is unpredictable, so renting gives you more flexibility.
If You Have a Partner, Start Discussing Your Parenting Approach
It may seem obvious, but many couples skip over this step. Start with a list of questions—both financial and personal—to discuss before having kids. What aspects of your childhood would you want to recreate for your children? What would you like to avoid? How do you envision spending time as a family—dinners together, vacations, or daily routines? These conversations can reveal how your values may impact your financial priorities.
Other key points include deciding where you’d like to live (city vs. suburbs), whether you’ll both work, and how childcare responsibilities will be divided. Even questions about higher education can come into play. While you don’t need to have everything planned out, starting a 529 savings plan for college (or other educational expenses) early on can be helpful.
Plan for Childcare and Support
When it comes to childcare, consider your options—daycare, nanny, nanny share, or help from family. Each choice comes with its own set of costs, and it’s important to research what’s typical in your area. Talking to parent friends or reaching out to local daycare providers can give you a clearer picture.
You’ll also want to think about your support system. Even if family members are eager to help, it’s important to have conversations about what they’re realistically able to commit to. Don’t just assume help will be there—find out what people can actually do.
Create a Baby Budget
Baby expenses typically fall into three categories: gear (one-time purchases like strollers or cribs), supplies (ongoing costs like diapers and formula), and services (childcare and healthcare).
According to many parents, the first category—gear—is where people can save the most. Hand-me-downs from friends and family can be a lifesaver, and you can often find second-hand baby gear in great condition through local parent groups. On the other hand, supplies like diapers and formula are unavoidable expenses, so it’s smart to budget generously.
When it comes to healthcare, choose a plan with a low out-of-pocket maximum if you’re planning to get pregnant. Though the monthly premiums may be higher, this can protect you from unexpected medical costs during pregnancy and early parenthood.
Evaluate Your Budget
Once you’ve created your baby budget, give it a trial run. If you’re planning to take time off work after the baby arrives, try living off one income for a few months and see how it feels. Or if you’re expecting, start setting aside what childcare will cost each month. This helps give you a sense of whether your plan is realistic or if adjustments are needed.
It’s worth remembering that having a child isn’t just about adding new expenses; it’s about a whole shift in how you spend money. While child-related costs may increase, other expenses—like dining out or traveling—might decrease. However, your social life might now revolve around free activities like park visits, and you may cook at home much more often. It may seem like a big change, but it can also be a welcome one.
Don’t Aim for Perfection—Trust That You’ll Figure It Out
If you’re already reading this, you’re on the right track. Trust that your research and planning is evidence that you'll eventually figure it all out.
Lastly, keep in mind that many baby expenses are temporary. Formula and diapers are short-term costs, and by age 4 or 5, your child may be in school most of the day, reducing childcare costs. Though the early years can feel financially overwhelming, they pass more quickly than you might expect.
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