How to financially prepare for a family

Are you thinking about starting a family? Get ready for some sticker shock. The Department of Agriculture puts the cost of raising a child at almost $234,000.

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“Your life’s about to change,” said Kristian Finfrock, founder and lead financial planner at Retirement Income Strategies. “This could perhaps be the single greatest blessing you’ve ever experienced as you welcome a new life in the world. That also includes some financial responsibilities. It’s important to sit down and make a list and realize not only are you caring for yourself and your partner, but you are also caring for a new member of the family, maybe more.”

Health insurance

Couples need to consider the cost of health insurance both before and after having a child.

“You've got to focus not only on yourself and the treatments but also the doctor visits as you are preparing for the birth,” said Finfrock.

“Then after the arrival of the child, you are going to have to select a pediatrician. Then obviously, covering for the cost of not being at work. Do you have any benefits through your employer that will pay? If not, then you need to look for alternative ways to cover the cost of not being at work.”


Finfrock said budgeting is almost a swear word to some families. They get to the end of the month and realize there isn’t any money left. Budgeting is simply taking control of your finances and telling your money where to go. He said the younger you start learning how to budget, the better positioned you will be when you get older.

Pre-birth budget: Families should prepare for increased medical expenses, the cost of baby furniture, supplies and a higher food bill for mommy and the growing baby inside of her.

Post-birth budget: With mommy on maternity leave, the family may bring in less income. Families should also factor in the cost of everything from baby food to diapers.

Child care: Caring for a child is often the biggest expense for families.

“This is a very large cost,” Finfrock said. “Families today are choosing to have one of the two partners stay home and take care of the child as opposed to doing full-time child care.”

Financial planning

Finfrock said life insurance coverage and college costs two important areas for families to consider.

Personal life insurance coverage:  What if something were to happen to you or your partner? Could your surviving family stay in the same home? Could you afford the same lifestyle?

“The primary purpose of life insurance is the replacement of income with the unexpected loss of a partner in a relationship,” he said. “Now that you are bringing a new life in, you have to think about not only your personal expenses but also caring for that additional person. Do you have enough coverage? A generic rule of thumb, we like to encourage young families to get 8 to 10 percent of their annual income.”

Future college expenses: Whether your child ultimately attends a four-year college or a trade school, Finfrock said a 529 plan is a tax-efficient way to save for your child's educational expenses.

“One of the unique features of a 529 plan is that you can change the beneficiary,” he said. “What we have seen people do is open a 529 plan on their own and begin making contributions to get the tax benefits. Then after the child is born, change beneficiaries so that now the child is the primary beneficiary. You sort of get a head start on saving for college for the child.”

Estate planning

Nobody likes to think about death or disability. Finfrock says at a minimum, every family needs a will and a power of attorney.

“If one or both of the parents are no longer here, god forbid they pass away with a minor child,” he said. “Who is going to care for the child? Who is going to make financial decisions? If you have life insurance, if you have retirement accounts, the money will go to your children. Have you double-checked your beneficiaries? Have you named your spouse as the beneficiary?”

Finfrock says if you have a young family, it makes sense to consider having a trust. The trust would allow you to keep making decisions for the well-being of your child from the grave.

“You can name the trustee, the person that will take care of the child,” he said. “Also control how the trustee spends any assets you’ve left behind for the benefit of the child. It will also control how the child receives these benefits as a beneficiary until they become an adult.”

Saving for retirement

With the birth of a child comes new obligations and priorities. As tempting as it may be, Finfrock said parents shouldn’t neglect their retirement.

“You shouldn’t stop saving,” he said. “At a minimum, you should save 10 to 15 percent of your earnings in a retirement account. If one of the partners chooses not to work, you can’t forget about that person’s retirement account.”


Finfrock suggests an individual retirement account or IRA for a nonworking spouse.

“So many families want to give their child the life they never had,” he said. “Even I was guilty of this, being the father of two girls, now 17 and 14. But you really can’t stop saving for your own personal retirement. As much as we may not want our child to take out a loan for college, you can get a loan. You cannot get a loan for retirement.”

Linda Bell joined FOX Business Network (FBN) in 2014 as an assignment editor. She is an award-winning writer of business and financial content.  You can follow her on Twitter @lindanbell