Skip to headerSkip to main contentSkip to footer
Get our Free E-newslettersGet our Free E-newsletters
Kiplinger logoLink to homepage
Get our Free E-newslettersGet our Free E-newsletters
Subscribe to Kiplinger
Subscribe to Kiplinger
Save up to 76%
Subscribe
Subscribe to Kiplinger
  • Store
  • Home
  • Investing
  • Retirement
  • Taxes
  • Personal Finance
  • Your Business
  • Wealth Creation
    • Podcasts
    • Economic Outlooks
    • Tools
    • Kiplinger's Personal Finance Magazine
    • The Kiplinger Letter
    • The Kiplinger Tax Letter
    • Kiplinger's Investing for Income
    • Kiplinger's Retirement Report
    • Store
    • Manage My E-Newsletters
    • My Subscriptions
Skip advert
  • Home
  • personal finance
personal finance

Money Matters to Consider When Bringing Home Baby No. 2

As my husband and I learned recently, expanding your family from one to two kids comes with a number of financial aspects to plan for.

by: Julia Pham, CFP®, AIF®, CDFA®
June 7, 2022
A newborn baby looks at his mother, wide-eyed.

Getty Images

Skip advert

If you’re a parent, you already know how overwhelming bringing your first child into the world is. Everything is new and may feel a bit scary. By the time you welcome your second child into the world, you may feel more confident, like you’ve learned a thing or two and that you know what you’re doing.

I certainly did when we welcomed our daughter (and second child) last October. We were more relaxed – and took things day by day. We even procrastinated a little bit on the prep work for the new baby because we had done this before and thought, “We’ve got this.”

I knew having a second child would change the dynamics of our family, but certain financial aspects took us by surprise. What follows are some things that I learned when my husband and I grew our family of three to a family of four.

  • Are You Financially Ready to Have Children?
Skip advert
Skip advert
Skip advert

1 of 5

Medical costs: Mine were actually lower this time

A woman holds her new baby from her hospital bed with her husband nearby and a congratulations balloon.

Getty Images

Skip advert

Medical benefits change, as well as medical needs, often affecting the costs of bringing a new life into the world. Between my first and second pregnancy, my husband changed jobs, resulting in a change in our medical insurance. A pleasant result of that change was that the out-of-pocket cost of my daughter’s birth was significantly cheaper than the birth of my son.

I know that not everyone is as lucky though, and costs could swing the opposite way. Remember to factor in the benefits of any new insurance policies, including making note of co-pays and deductibles. Since I found that it was difficult to figure out beforehand how much our medical expenses were going to be, it is also very important to note your out-of-pocket max, which is a cap on the amount of money you pay for covered medical services in a year. Once you meet that limit, your plan will cover 100% of your health costs for the rest of the year.

Also, if your company provides access to a health savings account (HSA) or flexible spending account (FSA), take advantage of it. These accounts can be used on eligible medical expenses and funded with pre-tax dollars directly from your paycheck – reducing your taxable income.

  • HSAs Make Health Care More Affordable
Skip advert
Skip advert
Skip advert

2 of 5

Housing: It might be time to move

A toddler and a baby peek out of a moving box.

Getty Images

Skip advert

A growing family requires more space. We were shocked at how cramped we quickly felt when adding our second little one, especially since  she is barely crawling! Between all the clothes, toys, bottles and baby gear, coupled with the lack of time to organize, we decided a move was in order sooner than we anticipated. This increased our budget considerably.

In fact, housing costs represent the largest portion of household budgets for Millennials. Statistically, we Millennials are more conscious of finances than prior generations when deciding to start or grow a family, so maybe this is something you’ve already factored in. All these things added together, were a great reminder to revisit our budget and cut any discretionary expenses.

  • 12 Things Every Home Buyer Should Do
Skip advert
Skip advert
Skip advert

3 of 5

Child care costs: Double them!

A little boy drinks out of a yellow cup at day care.

Getty Images

Skip advert

In the U.S., the average cost of center-based infant care is $1,230 per month. I surprisingly learned that adding a second child offers very little benefit by way of a family discount – if any. Our particular day care I looked into only provided a 5% discount for a second child, which is fairly common.

If you have a two-working-parent household, you should be prepared to double the cost of your child care. This expense is a big reason one parent often steps away from their career to raise young children – if their income doesn’t exceed the child care costs significantly.

If your employer offers it, utilize a flexible spending account for dependent care, which is similar to the medical FSA and funded with pre-tax dollars. This account can be used to pay for eligible expenses, such as day care, babysitting,or nanny expenses.  You can also team up with other parents to hire a nanny who cares for a couple of families, thus halving your child care costs.

  • Smart Ways to Save on Child Care Costs
Skip advert
Skip advert
Skip advert

4 of 5

Baby gear and clothes: Expect to do some shopping

Baby clothes hang on a clothes line.

Getty Images

Skip advert

Hand-me-downs are great. I am all about reusing baby gear and clothes to save money, but there are some things that just can’t be salvaged since babies are, well, very messy. With that in mind, be sure to consider the additional cost of items that can’t be reused, like the baby clothes you can’t scrub the food stains out of. Surely you haven’t forgotten how many diapers babies go through. The American Academy of Pediatrics shares that families may spend close to $936 on disposable diapers in the first year alone.

Another surprise cost you should be aware of? There may be safety recalls in between the birth of children that may require new car seats, cribs or strollers – which don’t come cheap.

  • 15 Best Things to Buy at Dollar Stores (Dollar Tree Included)
Skip advert
Skip advert
Skip advert

5 of 5

College costs: Be prepared for a potentially big boost

A small piggy bank stands nose-to-nose with a larger one.

Getty Images

Skip advert

The average cost of college in the U.S. is $35,331 per year, including tuition, books and living expenses. With costs increasing at an annual rate of 6.8% per year, what many parents of multiple kids don’t realize is that by the time their second child goes off to college, the cost could be drastically higher.

I was surprised when looking at the difference between what we might potentially spend on our son, who was born four years ago, versus our daughter. You can help minimize the pain of sticker shock by utilizing an online college cost calculator, which can provide a better picture of how much you need to save each month to get to your goal.

529 college savings plans are a great savings vehicle for college expenses, and offer tax-deferred growth on investments and tax-free distributions when used for qualifying expenses. If you start contributions early, you can really take advantage of compound growth. In addition, other family members can contribute to the account besides parents in lieu of birthday and holiday presents.

There is a balancing act required of all parents – all while 76% of Millennial parents are carrying some kind of debt. Having a second child is a big emotional and financial decision. The bags under my eyes are a little heavier, and my bank account a little smaller. All that being said, the added considerations easily fall to the wayside with one smile from my daughter.

While financial factors aren’t a deciding factor in growing your family, taking these things into consideration before your new baby’s arrival can impact how prepared you feel when they’re finally here.

  • Do You Save for College or for Retirement? What Parents Need to Know
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

About the Author

Julia Pham, CFP®, AIF®, CDFA®

Wealth Adviser, Halbert Hargrove

Julia Pham joined Halbert Hargrove as a Wealth Adviser in 2015. Her role includes encouraging HH clients to explore and fine-tune their aspirations — and working with them to create a road map to attain the goals that matter to them. Julia has worked in financial services since 2007. Julia earned a Bachelor of Arts degree cum laude in Economics and Sociology, and an MBA, both from the University of California at Irvine.

Skip advert
Skip advert
Skip advert
  • wealth creation
  • personal finance
Share via EmailShare on FacebookShare on TwitterShare on LinkedIn
Skip advert
Skip advert
Skip advert
Skip advert

Recommended

Don’t Be Tricked into Voluntarily Paying Higher Taxes on Your IRA
IRAs

Don’t Be Tricked into Voluntarily Paying Higher Taxes on Your IRA

Traditional IRAs are set up in a way that basically incentivizes you (and your heirs) into paying the highest tax bill possible. Don’t fall for it. Co…
July 4, 2022
How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!
estate planning

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!

Upstream basis planning is a trust strategy that can save wealthy people on their capital gains taxes and income taxes associated with highly apprecia…
July 3, 2022
6 Ways Your Lawyer (and You) Can Screw Up Your Family Law Case
Divorce

6 Ways Your Lawyer (and You) Can Screw Up Your Family Law Case

Nothing hits closer to home than divorce and child custody cases. When lawyers get involved, things can go horribly wrong if you make these six common…
July 2, 2022
Protecting Your Home from Lawsuits with a Dynasty Trust
real estate

Protecting Your Home from Lawsuits with a Dynasty Trust

An irrevocable dynasty trust can play a valuable role in keeping the valuable equity in your home safe from personal and business-related lawsuits.
July 1, 2022

Most Popular

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!
estate planning

How to Use Your Estate Plan to Save on Taxes While You’re Still Alive!

Upstream basis planning is a trust strategy that can save wealthy people on their capital gains taxes and income taxes associated with highly apprecia…
July 3, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
5 Ways to Prepare for a Recession
recession

5 Ways to Prepare for a Recession

The signs seem to be pointing in one direction these days, so if you’re worried about being ready for a recession, consider taking these five measures…
June 28, 2022
  • Customer Service
  • About Us
  • Advertise With Us (PDF)
  • Privacy Policy
  • Cookie Policy
  • Kiplinger Careers
  • Accessibility
  • Privacy Preferences

Subscribe to Kiplinger's Personal Finance

Be a smarter, better informed investor.
Save up to 76%Subscribe to Kiplinger's Personal Finance
Do Not Sell My Information

Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site www.futureplc.com
© Future US LLC, 10th floor, 1100 13th Street NW, Washington, DC 20005. All rights reserved.

Follow us on InstagramFollow us on FacebookFollow us on TwitterConnect on LinkedInConnect on YouTube