Would you save money for a future child?

[KarenAylwood]

I used to hang out on the budget board all the time and it's been so long since I was here regularly!

I got married in early September and DH and I are trying to get our finances in order now that we've settled back in after the honeymoon and need to deposit our wedding cash/checks and combine our lives. Getting married and finances is a huge topic so I'll just say we're pretty much on the same page with spending and have been open with eachother on it (and our respective financial statuses) for the entire engagement/relationship.

We're thinking of trying to have a kiddo in a year or so (we're both around 30) and it got us thinking- could we save now, or should we be saving now? (note- this means pulling the goalie in like 9 months and letting nature take it's course- I'm not saying having a living breathing child here in a year's time because who knows how long it could actually take).

We'll both be working full time after "it" is born (so we'll pay for daycare) and right now we have an emergency account but are probably $5-7,000 short of where we want to be. We have no car payments but are planning on buying a new/new-to-us car within a year. We also owe his parents for some debt he incurred before we got together (we're paying $500/month on this- should be done in about 18 mos I think).

Would you start saving now for kiddo expenses or work on saving for a car? Or just bulk up the emergency fund to more than we need? I don't even know what to expect a child will need in terms of money. I have pretty good health insurance so I would expect a lot of the health expenses to be covered. Should we be ear-marking money for kid expenses or just go on our merry way with saving and forget about "it." What would you or what did you do?

TIA

 

[Gr8t Fan]

Personally, I'd bulk up the emergency fund as much as possible and also set up a separate account for the new/new to you car.

 

[NYEmomma]

I wouldn't start saving now if you have other expenses you'd like to pay off our accounts that you want to build up.

Kids don't *have* to be expensive for the first year or so. I breastfed so I didn't have to pay for formula and have a generous, large family and received all of our baby gear & necessities at our baby shower. Even if you don't anticipate a lot of gifts, it's SO much more economical to buy things second hand.

So our only real cost the first 12-14 months was diapers. I did buy a lot of those in advance.

The biggest expense I see in terms of your "start up cost" (lol) is the nursery furniture. You can get that second hand, but if you'd prefer to buy new, I'd probably save between $500-$1000 for that.

We did start saving for our anticipated hospital bill (I was planning on being a SAHM so we started banking my paychecks to adjust to living with one income), but it turns out we had GREAT insurance and only had to pay $200 or so for the delivery & care.

 

[SandrA9810]

Set aside for the new to you car. Are both your cars child/baby/car seat friendly? If hubby likes to drive in a pick up truck or something else that isn't car seat friendly, it might be wise to keep the old car for him to drive the baby around. Especially with day care, who knows you might have to stay a little later than usual at work or traffic is heavy.

Sounds like you should bulk up the emergency fund to where you're comfortable. Then stash away for baby expenses. If you see a great sale on a stoller/carseat or crib or something else you plan on getting, you could always hide it away in the back of the closet till it's time to need it.

Just remember so save up enough paychecks to cover your maternity leave. So if you get 12 weeks, save 12 of your paychecks without spending a dime of it. That way you're not struggling when the baby does come. You could always start now, saving out one check per month for the next year. Separate from the EF.

 

[Marionnette]

I used to hang out on the budget board all the time and it's been so long since I was here regularly!

I got married in early September and DH and I are trying to get our finances in order now that we've settled back in after the honeymoon and need to deposit our wedding cash/checks and combine our lives. Getting married and finances is a huge topic so I'll just say we're pretty much on the same page with spending and have been open with eachother on it (and our respective financial statuses) for the entire engagement/relationship.

We're thinking of trying to have a kiddo in a year or so (we're both around 30) and it got us thinking- could we save now, or should we be saving now? (note- this means pulling the goalie in like 9 months and letting nature take it's course- I'm not saying having a living breathing child here in a year's time because who knows how long it could actually take).

We'll both be working full time after "it" is born (so we'll pay for daycare) and right now we have an emergency account but are probably $5-7,000 short of where we want to be. We have no car payments but are planning on buying a new/new-to-us car within a year. We also owe his parents for some debt he incurred before we got together (we're paying $500/month on this- should be done in about 18 mos I think).

Would you start saving now for kiddo expenses or work on saving for a car? Or just bulk up the emergency fund to more than we need? I don't even know what to expect a child will need in terms of money. I have pretty good health insurance so I would expect a lot of the health expenses to be covered. Should we be ear-marking money for kid expenses or just go on our merry way with saving and forget about "it." What would you or what did you do?

TIA

Congratulations on your wedding.

I'm not sure what you mean by "saving for a future child". You cannot save for kids like you save for a new car or down payment on a house.

First, take a look at this article from just a couple weeks ago. The cost of raising a child to the age of 18 is in the neighborhood of $227K today (that's more than $12K per year!). And that doesn't include college!
http://www.chicagotribune.com/busin...not-including-college-20110921,0,258693.story

Second, have a back up plan. Heaven forbid that your child needs a parent to stay at home with them due to health problems! But it's important to consider the worst case scenario. How would you handle this?

What if you're blessed with multiples? Would you still be able to work and afford daycare? And what would happen with health insurance if you had to quit your job?

I don't want to discourage you from starting a family because children are a blessing. I just want to point out that the little rascals are an ongoing expense that never seems to end. It's great that you want to get ahead of the game with savings but don't expect to always stay ahead.

To answer your question, I would get all the debt paid off since it doesn't sound like it is all that much in the grand scheme of things. I would put as much as possible into the emergency fund - at least 6 months worth but ideally 9 months of living expenses. And I would get that new to you car taken care. Once I got those addressed and I was comfortable with our finances, I'd start the baby making.

 

[Irin997]

1) Pay off any high interest debt ASAP.
2) Get the e fund where you want it
3) Then start saving for your car.

It's pretty much impossible to estimate what you'll need for your future baby but at least the big things will be taken care of. If you want though, a PP had a great idea to start saving for your maternity leave.

 

[RachaelA]

I definitely think everyone needs a "baby fund" before they start TTC (or adding to it while TTC).

I'd get your e-fund to where you need it and then split what you had been putting in there between a baby fund and a new car fund. I think it helps to have specific accounts.

 

[bettymae1121]

Bulk up your emergency fund, save for a down payment on a car. If after that you still have extra money you can sock away, then maybe put some aside for baby.

Find out what your company's maternity leave policy is and if you get paid leave (and if so for how long). If you don't get paid leave you'll need to save for that. Most daycares won't take infants under 6 weeks so you need to be out of work at least that long. Also find out how much your monthy health insurance cost will go up (if at all) when you add a third person. Then start to research the average cost of day care in your area, even if you can't save up for it you can at least have an idea how it will affect your monthly budget. Likely all of your descretionary income will go towards daycare so it's important that you meet your emergency fund savings goals now, you likely won't be able to add to savings until your child goes to school full time.

 

[QVCshopper]

Interesting question. We started living on just my Dh's income around the time we started thinking about having a child. We saved a lot in retirement, since I wanted to be a SAHM eventually and would lose the 401k. We also just saved money--I guess you could call it an emergency fund or savings. Then, I never stopped working, and have a 401k, but did scale back hours. So, you never know what will happen once you have kids. Your mind changes, circumstances change, etc.

Anyway, we are expecting our third now, and I'm getting everything second hand (except for the car seat and stroller which I got at Target for 50% off), because we had given it all away. So, we spent about $200 getting ready for this one. We do still have the crib and high chair. But, other than that, we're pretty much covered.

And, I really really don't agree with the $227K for raising a child before college, unless that covers loss of income due to maternity leave or reducing work hours (which I don't think it does). I sent my daughter to school in Justice jeans, a Lands End shirt, and Gymboree sweater today. Total cost of outfit: .75 cents, and she looks adorable. So, there are definite ways to save money. You just have to know where to look.

Anyway, I would pay off your debt, which you are doing, and save the rest in the emergency fund. Maybe stash away some for the car/baby, or just know that part of your emergency fund is for those purposes. And congrats!

 

[RitaE]

I would just save money and then you can decide what need to put it towards as the needs arise.

 

[indimom]

I'd finish the emergency fund, and save as much as possible toward the car purchase.

Then, around the time you start trying or maybe once you are pregnant, I would start putting back the amount you expect to spend on day care: just load it into another savings account weekly. Check around your area for prices: this could vary from $100 a week to "the sky is the limit" based on your particular area.

This will give you a little more cushion in the bank for maternity leave or those emergencies you never expect (bed rest for the last month or whatever) and help you get aclimated to your "new budget" once the baby arrives.

 

[poohfriend77]

Then, around the time you start trying or maybe once you are pregnant, I would start putting back the amount you expect to spend on day care: just load it into another savings account weekly. Check around your area for prices: this could vary from $100 a week to "the sky is the limit" based on your particular area.

This is what I was going to suggest. When I got pregnant with my first, we knew I was going to be a SAHM. We "practiced" living on one income. The first few months, we put my whole salary toward debts, then we padded our savings.

If you're planning to continue working, you could still research the average cost of daycare and pay that amount directly into a savings account each month. That will help you bridge the gap if you have to take unpaid maternity leave, and you won't have a huge (financial) adjustment once you start taking the baby to daycare.

Kudos to you for thinking this far ahead!

 

[dzorn]

I used to hang out on the budget board all the time and it's been so long since I was here regularly!

I got married in early September and DH and I are trying to get our finances in order now that we've settled back in after the honeymoon and need to deposit our wedding cash/checks and combine our lives. Getting married and finances is a huge topic so I'll just say we're pretty much on the same page with spending and have been open with eachother on it (and our respective financial statuses) for the entire engagement/relationship.

We're thinking of trying to have a kiddo in a year or so (we're both around 30) and it got us thinking- could we save now, or should we be saving now? (note- this means pulling the goalie in like 9 months and letting nature take it's course- I'm not saying having a living breathing child here in a year's time because who knows how long it could actually take).

We'll both be working full time after "it" is born (so we'll pay for daycare) and right now we have an emergency account but are probably $5-7,000 short of where we want to be. We have no car payments but are planning on buying a new/new-to-us car within a year. We also owe his parents for some debt he incurred before we got together (we're paying $500/month on this- should be done in about 18 mos I think).

Would you start saving now for kiddo expenses or work on saving for a car? Or just bulk up the emergency fund to more than we need? I don't even know what to expect a child will need in terms of money. I have pretty good health insurance so I would expect a lot of the health expenses to be covered. Should we be ear-marking money for kid expenses or just go on our merry way with saving and forget about "it." What would you or what did you do?

TIA

I would start a separate fund for the new car and bulk up saving as much as possible including the possible income loss during the pregnancy/deliver/recovery. I would also look at getting the parents repaid.

Denise in MI

 

[mrsklamc]

Kill the debt first. Yes, a million things could happen with the kids but there's no way to save enough to prepare for ALL of them.

 

[dzorn]

Interesting question. We started living on just my Dh's income around the time we started thinking about having a child. We saved a lot in retirement, since I wanted to be a SAHM eventually and would lose the 401k. We also just saved money--I guess you could call it an emergency fund or savings. Then, I never stopped working, and have a 401k, but did scale back hours. So, you never know what will happen once you have kids. Your mind changes, circumstances change, etc.

Anyway, we are expecting our third now, and I'm getting everything second hand (except for the car seat and stroller which I got at Target for 50% off), because we had given it all away. So, we spent about $200 getting ready for this one. We do still have the crib and high chair. But, other than that, we're pretty much covered.

And, I really really don't agree with the $227K for raising a child before college, unless that covers loss of income due to maternity leave or reducing work hours (which I don't think it does). I sent my daughter to school in Justice jeans, a Lands End shirt, and Gymboree sweater today. Total cost of outfit: .75 cents, and she looks adorable. So, there are definite ways to save money. You just have to know where to look.

Anyway, I would pay off your debt, which you are doing, and save the rest in the emergency fund. Maybe stash away some for the car/baby, or just know that part of your emergency fund is for those purposes. And congrats!

We bought our current house when I was pregnant with our oldest. Even though we expected me to go back to work we budgeted what we could afford on only one income. With the way the housing market tanked and the economy in Michigan I am so thankful we did not count my income.

Denise in MI

 

[carseatmommy]

Emergency fund, then baby fund---

The baby fund could be used for infertility consults/treatment(heaven forbid, but it could happen to you), if you end up on bedrest, baby supplies, and any other mulititude of things that could happen in the future.

Susan

 

[KarenAylwood]

Thanks for all the great replies!!

Set aside for the new to you car. Are both your cars child/baby/car seat friendly? If hubby likes to drive in a pick up truck or something else that isn't car seat friendly, it might be wise to keep the old car for him to drive the baby around. Especially with day care, who knows you might have to stay a little later than usual at work or traffic is heavy.

Thinking of a baby is part of the reason DH is going to sell his car. I drive a 2005 Corolla (130K miles on it) and he drives a sporty 2 door manual which a) I can't drive and b) we can't fit a kid (or much else) in His car can get us a lot more money than mine can.

Congratulations on your wedding.

I'm not sure what you mean by "saving for a future child". You cannot save for kids like you save for a new car or down payment on a house.

Second, have a back up plan. Heaven forbid that your child needs a parent to stay at home with them due to health problems! But it's important to consider the worst case scenario. How would you handle this?

What if you're blessed with multiples? Would you still be able to work and afford daycare? And what would happen with health insurance if you had to quit your job?

I don't want to discourage you from starting a family because children are a blessing. I just want to point out that the little rascals are an ongoing expense that never seems to end. It's great that you want to get ahead of the game with savings but don't expect to always stay ahead.

To answer your question, I would get all the debt paid off since it doesn't sound like it is all that much in the grand scheme of things. I would put as much as possible into the emergency fund - at least 6 months worth but ideally 9 months of living expenses. And I would get that new to you car taken care. Once I got those addressed and I was comfortable with our finances, I'd start the baby making.

Thanks! To address what's above- yes I mean like saving for a house Sorry, I know it probably doesn't make much sense and I know that I'm an "ahead of the game" person and won't always be there. The planner in me sometimes gets the best of me. Worst case, DH will stay home. Right now I make 60% more than he does, and my benefits are much better (my 401K benefits are double what his are, and his health insurance costs 2.5x what mine does). This could always change, but this is what we're dealing with now.

Multiples... if we had triplets it *might* be worth it for DH to stay home but that'd be a stretch. I'd never stay home... it's just not financially a sound decision for us.

I think part of my reason for wanting to think about things now is that I don't want to push off kids much longer. I'd rather not have every duck in a row than get to the point where I have problems getting pregnant or and/or need to adopt (takes a while!), etc and things are much later than we had anticipated. As I've been told by many people- nothing will ever be perfect.

I'd finish the emergency fund, and save as much as possible toward the car purchase.

Then, around the time you start trying or maybe once you are pregnant, I would start putting back the amount you expect to spend on day care: just load it into another savings account weekly. Check around your area for prices: this could vary from $100 a week to "the sky is the limit" based on your particular area.

This will give you a little more cushion in the bank for maternity leave or those emergencies you never expect (bed rest for the last month or whatever) and help you get aclimated to your "new budget" once the baby arrives.

That's a great idea for saving for child care (and in my area the range I've seen is $800-$1000/month per child based on friends who have kids). My maternity leave is paid for but it's 6 weeks (C-section is 8). I don't think this includes bed rest, etc. I think they'd be able to work with me if I was on bed rest though as I do have somewhat of an ability to work from home if needed.

Lots of other things I didn't think about! Thanks everyone who replied so far. Looks like we need to beef up the emergency account- possibly to 9 months, and save for a downpayment. Likely when DH sells his car we'll get a sizeable amt for a downpayment which should help.

 

[MrsPete]

I used to hang out on the budget board all the time and it's been so long since I was here regularly!

I got married in early September and DH and I are trying to get our finances in order now that we've settled back in after the honeymoon and need to deposit our wedding cash/checks and combine our lives. Getting married and finances is a huge topic so I'll just say we're pretty much on the same page with spending and have been open with eachother on it (and our respective financial statuses) for the entire engagement/relationship.

We're thinking of trying to have a kiddo in a year or so (we're both around 30) and it got us thinking- could we save now, or should we be saving now? (note- this means pulling the goalie in like 9 months and letting nature take it's course- I'm not saying having a living breathing child here in a year's time because who knows how long it could actually take).

We'll both be working full time after "it" is born (so we'll pay for daycare) and right now we have an emergency account but are probably $5-7,000 short of where we want to be. We have no car payments but are planning on buying a new/new-to-us car within a year. We also owe his parents for some debt he incurred before we got together (we're paying $500/month on this- should be done in about 18 mos I think).

Would you start saving now for kiddo expenses or work on saving for a car? Or just bulk up the emergency fund to more than we need? I don't even know what to expect a child will need in terms of money. I have pretty good health insurance so I would expect a lot of the health expenses to be covered. Should we be ear-marking money for kid expenses or just go on our merry way with saving and forget about "it." What would you or what did you do?

TIA

Yes, we did start saving for our first child before she was conceived. However, we started our married life with a brand-new mortgage and no other debt.

In your case, I'd attack the debt first. You're looking at about $9000 -- two people working, no dependants, you should be able to knock that out quickly.

Then just save. Don't worry about ear-marking it for a child, for a car, or whatever. Just save. If you start your married life spending every penny available to you, then you start saving, you'll have to "cut back", which is hard. On the other hand, if you start out living on perhaps 80% of your salary, you'll become accustomed to that and will be able to save without sacrafice.

Two other hints for a new couple just starting out:

1. Keep driving that old car 'til it won't go any further. Once it's "old", it's worth zero anyway; why not keep it on the road and hold onto your money 'til you have to spend it? Our cars -- on average -- have lasted two years after the point we said, "It could be any day now".

2. Let's say you succeed in saving a nice chunk of change for your baby before you conceive. Just because you HAVE money in savings doesn't mean you have to SPEND all that money. Look for a nice used crib at a consignment store, used clothes, etc. Those things are easy to find, and you'll find that they are used for so short a period. Hold onto as much as you can and let the power of compound interest work for you.

First, take a look at this article from just a couple weeks ago. The cost of raising a child to the age of 18 is in the neighborhood of $227K today (that's more than $12K per year!). And that doesn't include college!

Those articles aren't particularly accurate. Say the average family earns about 50K/year (fairly average for across the country), say the average family contains four people (again, average), say the family spends every penny it earns (most people do) . . . you just spent right at 227K on one child over 18 years. 50,000 per year divided by four people = 12,500/person/year. 12,500 x 18 years = 225,000. However, that doesn't stand to reason. Just look at one factor: Housing. I have two children and live in a three-bedroom house; however, if I had only one child or if I had three children, I'd probably still live in this same house. Other things are just plain going to be expensive no matter what you do: For example, our 17-year old's car insurance costs as much as my car insurance, my husband's car insurance, and our house insurance put together.

Within reason, a child can cost as much or as little as you care to spend . . . and the results won't be all that different. Regardless, starting with a nest egg is a good idea.

And, I really really don't agree with the $227K for raising a child before college, unless that covers loss of income due to maternity leave or reducing work hours (which I don't think it does). I sent my daughter to school in Justice jeans, a Lands End shirt, and Gymboree sweater today. Total cost of outfit: .75 cents, and she looks adorable. So, there are definite ways to save money. You just have to know where to look.

Yes, that's what I meant by -- within reason -- raising a child can be expensive or inexpensive. Clothes are an easy way to save (though it's harder now that mine are 14 and 17).

Thinking of a baby is part of the reason DH is going to sell his car. I drive a 2005 Corolla (130K miles on it) and he drives a sporty 2 door manual which a) I can't drive and b) we can't fit a kid (or much else) in His car can get us a lot more money than mine can . . . As I've been told by many people- nothing will ever be perfect.

You can always learn to drive his car. It's usually cheaper to keep what you already have.

You're right that nothing will ever be perfect, but people who tell you things like that often are often trying to justify doing nothing. The more you can do to stay "ahead of the curve", the easier things'll be for you later.

 

[RachaelA]

I think part of my reason for wanting to think about things now is that I don't want to push off kids much longer. I'd rather not have every duck in a row than get to the point where I have problems getting pregnant or and/or need to adopt (takes a while!), etc and things are much later than we had anticipated. As I've been told by many people- nothing will ever be perfect.

I don't want to be a debbie downer or freak you out or anything, but anyone can have problems TTC no matter what their age is. I never thought at 24 years old, I would have had to deal with what we have. Don't use your age to rush into anything.

I think you have a good solid plan though to get everything in order. Things don't have to be perfect, but you should set yourself up as much as possible

 

[KarenAylwood]

I don't want to be a debbie downer or freak you out or anything, but anyone can have problems TTC no matter what their age is. I never thought at 24 years old, I would have had to deal with what we have. Don't use your age to rush into anything.

I think you have a good solid plan though to get everything in order. Things don't have to be perfect, but you should set yourself up as much as possible

Exactly! I could have issues now at 29 (part of my reason for thinking more about this is a friend is going through this now ). The idea is that the earlier we start trying, the earlier we know and can deal with it. My mom was 34 when she had me. I've felt for a while now I wish she was just a little younger and we had just a little more time.

Yes, we did start saving for our first child before she was conceived. However, we started our married life with a brand-new mortgage and no other debt.

In your case, I'd attack the debt first. You're looking at about $9000 -- two people working, no dependants, you should be able to knock that out quickly.

Then just save. Don't worry about ear-marking it for a child, for a car, or whatever. Just save. If you start your married life spending every penny available to you, then you start saving, you'll have to "cut back", which is hard. On the other hand, if you start out living on perhaps 80% of your salary, you'll become accustomed to that and will be able to save without sacrafice.

You're right that nothing will ever be perfect, but people who tell you things like that often are often trying to justify doing nothing. The more you can do to stay "ahead of the curve", the easier things'll be for you later.

Yes we have $9,000 in debt but it's also interest-free debt. His parents told him he never has to pay it back and they'll deduct from his inheritance. To me, it's the principle of the thing. I don't want to owe anyone any money if we can help it so we are paying it off. Since it's interest free, it makes the most sense to save what we can monthly for a car or put money into our emergency fund. Many times I've told him I want to just write a check and be done with it, but I know it makes more financial sense for us to just keep paying like we are.

I'm not learning to drive his car, we've already been down that road . But also it's too small to use. If my car broke down or if for some reason he needed to pick up our child, he'd have no way to do it with a little 2-door sports car. We're planning on driving my car into the ground however. My parents have always been "drive it til it dies" kind of people and I am as well, as long as the car is useful. Also his car is an Acura and the last year that they made that model so it's somewhat in demand- especially for one with low mileage and incredible condition- we've been quoted $13,000 for it.

In general we're at a good place. We have a lot in retirement for our age (well, I do), our only debt is our mortgage and the $9K we owe his parents, and our emergency fund can cover us for about 4 months if we both lose our jobs tomorrow. I also have money in the stock market that could cover us another 3 months but I don't want to cash any of that out unless it's an emergency. I think in wedding money we'll be able to add another month of spending money to our emergency fund.

I pretty much was just wondering if people earmark money for stuff in the future or just put it all in a lump sum and consider that their emergency fund. I also am now trying to cut back on extras so we'll have a little more left each month. Once I get DH on my insurance that will be $100/month saved right there!

It's really nice to hear all of the points people are coming up with that I haven't thought of. Most of the moms I know are very new ones and may have not learned all of the lessons many of you have.