Love and Money: 5 Things to Know Before You Start a Family (Part 3 of a 3-Part Series)

June 12, 2015

Connect Member

Certified financial planner, certified divorce financial analyst and estate planning specialist

Before I had my daughter, I thought I would probably like being a mom. I liked kids, I always wanted a family, and I knew my partner would make a wonderful dad. I had no idea just how amazing being a mother truly is. When I hear my little one’s tiny voice say, “Mama?” in the morning, it warms my heart like nothing else in the world.  

Parenting can also be all-consuming. Between urging your child not to eat crayons, doing more laundry than you ever thought a human could generate, and daydreaming about taking a three-hour nap while someone else cleans your home, it’s not easy to sit down and consider the financial logistics of child-rearing. So, before your family officially begins, take some time to think about these five pre-parenting considerations:

1. What’s Your Leave Situation?

Maternity leave is a tricky thing. Some employers give tons of leave; others aren’t able to pay for their employees to take time off. Get familiar with the Family and Medical Leave Act and whether it applies to your company.

Remember, being able to take family leave doesn’t necessarily mean you can take paid family leave. Learn your company’s internal policies. If your company doesn’t offer paid leave, find out if you can use some vacation time and cobble together some paid time off. Depending on how far out your due date is, you may be able to put together a savings plan to buy yourself some unpaid leave time. This is also where that emergency fund everyone talks about comes in handy. Having a cash cushion gives you greater flexibility to choose how much time you’d like to take.  

2. What’s Your Going Back to Work Game Plan?  

I read Lean In during my second trimester and got really excited about the idea of being a career-loving mom. My schedule was packed until my due date with meetings and work, and I enjoyed engaging with my clients right up until my little lady made her arrival. People told me I might not want to head right back to work, but I shrugged them off — what did they know?

As soon as my daughter arrived, I knew I wanted time to bond with her, work-free. Thankfully, I was able to negotiate a schedule that included working from home and adjusted hours. I was back at work fairly quickly, but the approach had changed from a face-time orientation to a productivity orientation.  

Find out what’s available to you before you leave. Can you work from home? Change your schedule? What does working from home look like? Be sure you’re fully equipped to log in to email in peace and truly get the job done when you’re home. All of this takes preparation, research, and discussions with your company. Finally, just because your company doesn’t currently offer flexible options for moms doesn’t mean you shouldn’t negotiate flexible options.  

I recently spoke with a woman who told me she’d “retired” from her career to be a mom. We both laughed at the idea of retirement reconciling with being a mom to two little ones. Being a stay-at-home mom is a full time job and an incredible career, an intense one at that. An 80- hour work week, anyone? If you decide to go the SAHM route, you still need a road map. Here’s where I’m going to get a little Debbie Downer on you.

Let’s say your boss called you in and said, “I want you to stop coming in, and to stay at home and be with your family. I will continue to pay all of the bills, and you will be taken care of for the rest of your life.” Sounds awesome, right? If that was what you wanted, wouldn’t you leave her office, skipping, with the contents of your desk and a signed contract agreeing that she’ll make sure everything is OK? Me too.

If you decide to stay home and your spouse is going to cover the bills, you may not get a 50-page contract saying so, but you should get an understanding of what the agreement entails. Does your partner think you’re staying home for five years, then going back to work and earning the same money you once did? Will you fund an IRA each year for yourself?  

Staying at home doesn’t mean excusing yourself from the table when it comes to your finances. Stay involved, know what’s going on, and really map out the expectations and assumptions. My clients who have stayed engaged in the financial aspect of their family are more confident and comfortable, and I wish the same for you.

3. Who’s Your Nanny?

Support is crucial when it comes to returning to work. Whether you budget, estimate, or don’t track expenses at all, you need to evaluate the impact that child care can have on your finances. The upside is that you may get a nice tax benefit from the child care credit. But when I went back to work, I was very conservative in my estimates of how much help I would need. In other words, I was being cheap at the price of my sanity. When you’re thinking about how much help you’ll need, try not to underestimate the true amount of hours — it’s better to budget for more expenses than for fewer.

If you’re looking at daycare as an option, be realistic about the amount of hours you’d truly like to have your child in daycare. It’s appealing to take the cheapest option, but think through the logistics. Are you going to be busting out of work early every day, speeding to Precious Pumpkins Daycare to scoop up your little one before the cutoff time, then rushing home to get dinner going and send off emails so you don’t look like a slacker?  

If your preference is for a babysitter or nanny, it’s tempting to pay them under the table. It seems easy; you don’t have to pay for taxes or workers’ compensation benefits, and there’s way less accounting. However, I strongly urge you to do it on the books. There are agencies out there that can help you to do tax withholding and set up an employer ID. You can even do direct deposit and have your taxes prepared for you each year.  

Finding good childcare is not easy and it’s a big decision to make, but it is a huge financial priority that should be accounted for in your plan. Even if this means pulling back in other areas, or reconfiguring your budget, you will see the benefit down the road. Being able to be present at work, without scheduling pressures, and know that your child is well cared for can lead to less stress and greater success in your career.  

4. When Do You Start Preparing for the College Years?

In my third trimester, I calculated how much it will cost us to send our daughter to college when she’s 18. Then I cried a little. College is expensive, and when you account for inflation, the numbers soar. Parents now are made to feel like criminals if they aren’t saving for tuition when their child is in utero. Here is my suggestion: don’t do it.  

Or, more specifically: If you are contributing enough money to your retirement account and completely on track with your own retirement savings, if you have enough money in an emergency fund for you and your family, and if you do not have consumer debt, then by all means, save away. However, if your retirement account is underfunded, or you do not have an emergency fund, or you have debt carrying high interest rates, please prioritize using the oxygen mask analogy. When you’re on an airplane the attendants will remind you to put on your own oxygen mask before helping others. First, make sure you are on target with your emergency fund and your retirement savings, and that you aren’t struggling with debt. Then, add college savings to your plan.

Saving for college is a big priority, and the impact of compounding interest plus tax deferral cannot be understated. However, I fear for the parents who have been pressured into funneling cash into a 529 plan at the cost of not having an emergency fund if someone loses their job or something else goes awry. Bottom line: adjust your priorities to ensure you are realistically meeting your goals. Don’t be the lady living above her son’s garage in retirement because you couldn’t live with the idea of him having to pay off a student loan.

5. What Will You Need to Buy?

New stroller. New car seat. New clothes. When I think of how much money we spent on new stuff for my daughter, it makes me a little nauseated. News flash: your kid is going to vomit, chew, draw, or pee on just about everything you buy. New doesn’t stay new too long.  

Now, my friend who is much smarter than I am decided not to go the “new” route. She borrowed tons of gently used stuff from our group of friends, spent waaaay less money than we did, and has the same great stuff for her darling little girl. Spending less means you have an opportunity to save more. I am still kicking myself for this one.

A final note on being a financially savvy new mom: I’ve noticed that culturally, we as women tend to bond over spending experiences. We go out for mani-pedis and spend money; we go out to dinner or drinks or brunch and spend money. We go to classes with our little ones and spend money. Almost everything we do involves consumerism at some level. There’s nothing wrong with being a consumer. We’d deflate the economy if no one spent money. But if we  shift our awareness toward saving, we can reduce the “macho spending” that occurs when we do the competitive parenting thing.  

It doesn’t matter what stroller you have or how much you’ve shelled out for all those tiny tots classes. Save money, spend time, and enjoy being a mom. Being a parent is a privilege and one of life’s greatest joys — be present for it!

Emily Boothroyd is a member of the DailyWorth Connect program. Read more about the program here.