Finances are a major reason why Millennials have fewer children than previous generations. In fact, the U.S. birth rate fell 4% in 2020 to its lowest level on record, about 56 births per 1,000 women — half of what it was in the 1960s, according to CDC data.
Where does your financial situation need to be to feel good about having kids? To get an idea, I asked Eric Roberge — a CERTIFIED FINANCIAL PLANNER™ professional and a new father — a series of frank questions on the financial side of becoming a parent.
Q: As a financial planner, I imagine you often consider the financial impact of your decisions. How much were finances a part of your decision to start a family?
A: Our family’s finances weren’t the leading factor in the decision to have children, but they certainly played a big role in determining the timing. As we increased our financial stability, it freed up the mental space and energy to begin having the conversation about whether we really wanted to become parents. We were able to talk more about our actual desires and not be influenced by external factors — including money, but also things like societal pressure and comments from other people or family members.
Q: Some people may want to start trying to have a child, but they’re not sure if they’re financially ready. What should a would-be parent have checked off first?
A: If your earnings or your career is shaky or sporadic, for example, I might prioritize establishing a steady income with a reliable job before focusing on kids and working on building a cash cushion for emergencies.
Obviously, real life isn’t always smooth and predictable. Things go wrong and we deal with curveballs all the time. You can’t know exactly what’s coming, but you should build a financial base that’s sturdy enough to handle a few setbacks. We talk about having a “bulletproof balance sheet” — a financial plan that includes room for error.
Q: Before a child is born, there are all sorts of costs to plan for – hospital bills, a crib and, of course, child care. Is there a set amount of money expecting parents should have set aside before a child is born?
A: We wrote an in-depth blog post about this very issue: You do need some amount in savings to financially prepare to have a baby. What parents need and want will vary a lot, so estimate a cost for each of the following expenditures:
- Your portion of expected medical bills. Talk to your insurance company to get the details on your out-of-pocket maximum.
- Material items that you need (or want) for the baby (bassinet, clothing, diapers, etc.).
- Prenatal and/or postnatal …….