Financial Planning For Starting A Family - Money Mastery Millennial (2024)

Starting a family is an exciting and fulfilling milestone in life. According to a recent study by the USDA, raising a child to adulthood can cost upwards of $233,610, not including college expenses.

For millennials, who are already burdened with student loan debt and a challenging job market, this can be a daunting figure.

However, with proper financial planning, it is possible to navigate the financial responsibilities of starting a family with greater ease and confidence.

Research shows that millennials are more likely than previous generations to seek financial advice and take proactive steps to manage their money.

According to a 2019 survey by Bank of America, 73% of millennials say they are actively saving, and 67% say they have a budget.

This demonstrates the importance of financial planning for starting a family and the impact it can have on their financial well-being.

This blog post will provide insights into financial planning for major life events, specifically starting a family, and discuss actionable steps that millennials can take to secure their financial future.

We will explore the various costs associated with raising a family, such as housing, food, education, childcare, and medical expenses.

Additionally, we will discuss the importance of assessing financial goals, reviewing health insurance coverage, maximizing employee benefits, establishing an emergency fund, and budgeting for child-related expenses.

By taking these steps, millennials can prepare themselves for the financial responsibilities that come with starting a family and ensure that they are well-equipped to handle any unexpected expenses.

Whether you’re already a parent or planning to start a family soon, this blog post will provide valuable insights into financial planning for major life events.

1. Understanding the Cost of Raising a Family

Raising a family is a major financial responsibility. Understanding the costs associated with starting and raising a family is crucial to creating a successful financial plan.

Below are some of the major expenses that come with having children:

1.1 Housing

• As a family grows, so does the need for space.
• The cost of housing can vary widely depending on location.
• Consider not just the monthly rent or mortgage payment, but also the cost of utilities, repairs, and maintenance.

1.2 Food

According to the USDA, the average cost to feed a child from birth to age 18 is around $60,000.

This figure does not include the cost of eating out, which can quickly add up.

1.3 Education

The cost of education varies widely depending on the type of school and location.

According to College Board, the average cost of tuition and fees at a four-year public university was $10,560 for in-state students in 2020-2021.

For private four-year institutions, the average cost was $37,650.

1.4 Childcare

The cost of childcare can vary widely depending on location.

It can easily add up to thousands of dollars per year.

This is an important consideration for parents who need to work to support their families.

1.5 Medical expenses

It is important to review health insurance coverage and understand what is covered and what is not.

Medical expenses can include routine check-ups, vaccinations, and unforeseen medical emergencies.

1.6 Unexpected expenses

Prepare for unexpected expenses such as medical emergencies, car repairs, or home repairs.

Having an emergency fund is essential to prepare for unexpected costs.

By understanding these major expenses and preparing for unexpected costs, millennials can develop a financial plan that meets their family’s needs and prepares them for the future.

2. Financial Planning Considerations Before Starting a Family

Starting a family is an exciting and fulfilling experience, but it can also be financially demanding.

Therefore, it is essential to assess your financial goals and create a plan to ensure that you can support your growing family.

Here are some financial planning considerations to keep in mind, supported by relevant statistics and research:

2.1 Assessing Financial Goals

According to a survey conducted by Bank of America, 77% of millennials consider financial stability as a top priority before starting a family.

Before starting a family, it is crucial to assess your current financial situation and determine your financial goals for the future.

Consider questions like:

• What are your short-term and long-term financial goals?
• How much money do you need to save to achieve those goals?
• How much debt do you currently have, and how will you pay it off?

Once you have a clear understanding of your financial goals, you can create a plan to achieve them.

2.2 Reviewing Health Insurance Coverage

According to the National Center for Health Statistics, the average cost of childbirth in the United States is $10,808.

Having adequate health insurance coverage is crucial when starting a family.

Review your current health insurance policy and consider the following questions:

• What services are covered under your policy?
• What are the co-payments and deductibles?
• What is the maximum out-of-pocket expense?
• Does the policy cover prenatal care, childbirth, and pediatric care?

If your current policy doesn’t provide adequate coverage, consider upgrading to a policy that meets your family’s needs.

2.3 Maximizing Employee Benefits

According to a survey by the Society for Human Resource Management, 92% of employers offer some form of paid time off for new parents.

Many employers offer valuable benefits that can help reduce the cost of starting a family.

Review your employer’s benefits package and consider the following questions:

• Does your employer offer a flexible spending account (FSA) or health savings account (HSA)?
• Does your employer offer paid parental leave?
• Does your employer offer any family-related benefits, such as childcare or adoption assistance?

Take advantage of any benefits offered by your employer to reduce the cost of starting a family.

2.4 Establishing an Emergency Fund

According to a survey by Bankrate, only 39% of Americans have enough savings to cover a $1,000 emergency expense.

Starting a family comes with unexpected expenses. Establishing an emergency fund is crucial to prepare for unexpected costs.

Consider the following questions:

• How much money do you need to save for emergencies?
• Where should you keep your emergency fund?
• How will you replenish your emergency fund if you use it?

By establishing an emergency fund, you’ll be prepared to handle unexpected expenses without derailing your financial goals.

Financial planning is an essential consideration before starting a family.

By assessing your financial goals, reviewing your health insurance coverage, maximizing your employee benefits, and establishing an emergency fund, you’ll be better prepared to support your growing family.

Take the time to create a plan that meets your family’s needs and helps you achieve your financial goals.

3. Budgeting for Starting a Family

Starting a family is an exciting and life-changing event, but let’s face it, it can also be expensive.

From diapers to daycare, the cost of raising a child can quickly add up. Therefore, it’s essential to create a budget that accounts for child-related expenses.

Here are some budgeting tips to consider when starting a family:

3.1 Developing a Budget That Accounts for Child-Related Expenses

The first step in creating a budget that accounts for child-related expenses is to assess what those expenses will be.

Did you know that according to the U.S. Department of Agriculture, the cost of raising a child from birth to age 18 is approximately $233,610? That’s a lot of money!

Consider the following questions:

• What are the ongoing costs of raising a child, such as housing, food, and childcare?
• What are the one-time expenses associated with having a baby, such as medical bills and baby gear?
• How will your income change when you take time off work for maternity or paternity leave?

Once you have a clear understanding of your child-related expenses, you can create a budget that meets your family’s needs.

3.2 Making Cuts to Non-Essential Expenses

When starting a family, it’s essential to prioritize your spending.

It’s easy to get caught up in the excitement and spend more money than necessary, but it’s crucial to be mindful of your spending.

Take a look at your monthly expenses and identify non-essential expenses that you can cut back on.

For example, did you know that millennials spend an average of $2,327 per year on dining out, according to a survey by Bankrate? That’s a lot of money that could be redirected toward your child-related expenses.

Consider other non-essential expenses that you can cut back on to stretch your budget further.

3.3 Identifying Areas Where Savings Can Be Maximized

There are many ways to maximize savings when starting a family. Here are a few tips:

• Buy items in bulk, such as diapers and baby food, to save money over time.
• Consider purchasing secondhand baby gear, such as strollers and cribs, to save money upfront.
• Look for free or low-cost activities to do with your family, such as visiting a local park or library.
• Use coupons and cashback apps when shopping for baby-related items to maximize savings.

By identifying areas where savings can be maximized, you’ll be able to stretch your budget further and better prepare for the expenses of starting a family.

Creating a budget that accounts for child-related expenses is essential when starting a family. It may not be the most exciting part of starting a family, but it is crucial to set yourself up for financial success.

By developing a budget that includes ongoing and one-time expenses, making cuts to non-essential expenses, and identifying areas where savings can be maximized, you’ll be better prepared to support your growing family financially.

Take the time to create a budget that meets your family’s needs and helps you achieve your financial goals.

4. Managing Debt

Managing debt is a crucial aspect of personal finance, particularly when starting a family. It’s essential to have a clear understanding of your debt and make a plan to pay it off efficiently.

Here are some tips to manage your debt effectively:

4.1 Evaluating Existing Debt

Did you know that as of 2021, the average American household has around $90,460 in debt?

That’s a staggering number, and it highlights the importance of evaluating your existing debt.

To get started, make a list of all your debts, including credit card debt, student loans, and car loans.

This will help you prioritize which debts to pay off first.

4.2 Paying Off High-Interest Debt

High-interest debt, such as credit card debt, can quickly spiral out of control and make it challenging to save for your family’s future.

According to recent statistics, the average credit card interest rate is around 16%, which means that you could be paying a significant amount of money in interest alone.

That’s why it’s crucial to prioritize paying off high-interest debt first. Consider using the debt snowball method, where you pay off the smallest debt first and then move on to the next one.

4.3 Consolidating Debt If Necessary

If you have multiple debts with high-interest rates, consolidating your debt can be an effective strategy to manage it.

Debt consolidation involves taking out a loan to pay off all your existing debts, leaving you with a single loan payment at a lower interest rate.

This can help you save money on interest over time and simplify your debt repayment process.

However, it’s crucial to weigh the pros and cons and ensure that debt consolidation is the right choice for you.

In conclusion, managing debt is a crucial part of personal finance, and it’s vital to prioritize paying off high-interest debt when starting a family.

By evaluating your existing debt, paying off high-interest debt first, and considering debt consolidation if necessary, you can effectively manage your debt and set yourself up for financial success.

5. Saving for the Future

When starting a family, it’s essential to not only manage your current finances but also plan for your future financial goals.

Did you know that according to a survey conducted by Bank of America, 73% of millennials prioritize saving for long-term goals, such as retirement and their children’s education?

Here are some tips on how to save for the future:

5.1 Setting Financial Goals

Setting financial goals is crucial to achieving long-term financial success.

When starting a family, it’s important to have a clear understanding of your financial goals and create a plan to achieve them.

For instance, you may want to save for a down payment on a house, an emergency fund, or your child’s education.

Setting both short-term and long-term financial goals will help you prioritize your spending and focus on what’s most important.

5.2 Exploring Investment Opportunities

Investing can be an excellent way to grow your wealth and reach your financial goals. According to a survey by Fidelity Investments, millennials have an average of $8,370 invested in the stock market.

While investing comes with risks, it can offer higher potential returns than traditional savings accounts or CDs.

Consider exploring investment opportunities such as stocks, mutual funds, and real estate.

However, it’s essential to research and understands the risks associated with each investment option before making any decisions.

5.3 Planning for College Savings

Did you know that the average cost of tuition and fees at a public four-year college is $10,560 per year for in-state students and $27,020 for out-of-state students?

Planning for college savings early is essential to avoid taking on significant student loan debt.

Consider opening a 529 college savings plan or a Coverdell Education Savings Account (ESA) to save for your child’s education.

These accounts offer tax benefits and can help you save for college expenses over time.

Saving for the future is a critical aspect of personal finance, particularly when starting a family.

By setting financial goals, exploring investment opportunities, and planning for college savings, you can effectively manage your finances and achieve your long-term financial goals.

Remember, starting early and consistently saving and investing for your family’s future can make a significant impact in the long run.

6. Preparing for Child-Related Expenses

Starting a family comes with a lot of financial responsibilities, and it’s important to be prepared for the expenses that come with it.

There are many costs to consider, including maternity and paternity leave, childbirth, medical expenses, and childcare.

6.1 Understanding maternity and paternity leave policies

It’s important to understand your employer’s policies regarding maternity and paternity leave. Many companies offer some form of paid leave, but the amount of time and pay can vary greatly.

In the United States, the Family and Medical Leave Act (FMLA) allows eligible employees to take up to 12 weeks of unpaid leave in 12 months for the birth or adoption of a child.

However, not all employees are eligible for FMLA, and unpaid leave can be difficult to manage financially.

6.2 Planning for childbirth and related medical expenses

Childbirth and related medical expenses can be one of the biggest costs associated with starting a family.

According to the National Institutes of Health, the average cost of a vagin*l delivery is around $8,800, and the average cost of a cesarean section is around $11,200.

It’s important to review your health insurance coverage to understand what expenses will be covered and what you will be responsible for paying out of pocket.

6.3 Preparing for childcare expenses

Childcare is another significant expense for families. According to a report by the Economic Policy Institute, the average cost of full-time childcare for an infant is $1,230 per month.

It’s important to start planning for childcare expenses as early as possible and consider options like in-home care, family daycare, and employer-provided daycare.

Additionally, you may be eligible for tax credits or employer-provided benefits that can help offset the cost of childcare.

By understanding and planning for these child-related expenses, you can better prepare yourself financially for starting a family.

Bottom Line…

Starting a family is one of life’s most significant milestones, but it can also be overwhelming when you think about the financial responsibilities that come with it.

The good news is that with the right financial planning, you can ease some of the stress that comes with this exciting chapter of your life.

We’ve covered a lot of ground in this post, from understanding the costs of raising a child to manage debt and preparing for child-related expenses.

By taking the time to assess your financial goals and develop a budget that works for your growing family, you can be better equipped to manage your finances while still enjoying the joys of parenthood.

It’s also important to keep in mind that your family’s financial situation is unique. While it’s essential to make informed decisions and seek advice when needed, there’s no one-size-fits-all approach to financial planning.

By being proactive and keeping your long-term financial goals in mind, you can set yourself up for success and make sure that you’re prepared for whatever comes your way.

Overall, starting a family is an incredible experience, and with the right financial planning, you can enjoy it without worrying about the added stress of money.

Remember to take things one step at a time, and don’t be afraid to seek help when you need it.

Here’s to a happy and financially secure future for you and your growing family!