Are You Financially Ready to Have Children?

Yes, children are expensive. Can you handle it? A financial planner with a new baby at home has some helpful suggestions and guidelines for all the potential parents out there who may be wondering if the time is right.

A mom and dad hold a smiling baby.
(Image credit: Getty Images)

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?

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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 services (doula, housekeeper, lawncare, etc.).
  • A bigger budget for temporary extras (takeout food, etc.).

Keep in mind, however, that having kids is much more about your cash flow than about setting aside a set amount of money. Having a child is not a one-time expense – it creates an ongoing cash demand for at least 18 years!

Q: What are the ongoing costs of being parent? Any expenses most people don’t see coming?

A: We use a baseline assumption of $15,000 per year, per child, based on some real-world numbers from the USDA. We also adjust their estimate upward, because most of our clients are middle-aged urban professionals with gross household incomes of $300,000 or more.

The “expense” many people forget to think about is how having children will put more pressure on their cash flow. For example, many parents feel pressured to buy or upgrade a home. Most people look at their current budget to determine how much house they can afford and buy as much as possible. Adding the cost of a baby on top of a mortgage that was manageable before now causes extreme stress on cash flow.

Q: If someone isn’t sure whether they can afford all of this, any advice?

A: If you’re not ready to be a parent right now, and finances are one factor, that’s OK.

If having a child as soon as you can is the most important to you —- but you’re not sure if you can afford it — then look at how you’re currently using your money. Does how you spend align with your stated No. 1 priority? If not, you may need to make some changes and cut back in some areas so you can free up cash flow to financially prepare for becoming a parent.

Remember there is no single way to be a good parent. A baby needs your love, attention, presence and commitment above all else. Save money where you can by accepting help and hand-me-downs. I would also recommend considering the flipside: What can you do to increase your income?

The decision to start or expand a family is not only a financial one. To help you focus on all the other things, consider working with a financial planner like Eric Roberge and his firm, Beyond Your Hammock. You can also search the XY Planning Network to find hundreds of financial planners who focus on the needs of Millennial clients.


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.

Matt J. Goren, Ph.D., CFP®
Assistant Professor of Financial Planning, The American College of Financial Services

Matt J. Goren is an Assistant Professor of Financial Planning at The American College of Financial Services who focuses on the interplay of personal finance and psychology. In addition to teaching and developing content, he provides strategic consulting on financial literacy initiatives and hosts a personal finance radio show, Nothing Funny About Money, which was named 2018’s most outstanding consumer financial information resource by the AFCPE.