Starting a Family? Here's How to Get Your Finances in Order

Deciding that you're ready to start a family isn't just an emotional decision – it's also a financial one. According to data from the most recent USDA Consumer Expenditure Survey, raising a child costs the average family $12,980 each year.

That figure doesn't account for all the extra bills that come up when you first start your family, either. The Kaiser Family Foundation estimates the total cost of pregnancy, childbirth, and postpartum care at $18,865, with the average out-of-pocket payment coming in at $2,854 for women enrolled in large group plans. Then there's the cost of nursery furniture ($2,000 or more), diapers for the first year (around $1,000), baby formula (between $800 and $3,000 per year) or breastfeeding equipment (anywhere between $50 to several hundred dollars), and more. It's a lot to wrap your head around.

New parents have to be prepared to shoulder the costs of starting a family – and the sooner you start planning for it, the better, according to Shannah Compton Game, a Certified Financial Planner and the host of the Everyone's Talkin' Money podcast. "We can't just put our feet in the sand and ignore the money piece," she says. Game recommends starting to look closely at your finances in the first trimester of pregnancy or as soon as you begin thinking about starting a family. Here's how to get started.

First, Game recommends taking a close look at your finances today. "I usually print out a bank statement, get some highlighters, and just start categorizing where everything goes," she explains. "When we understand the real cold, hard facts of where our money's going, that puts us in a controlled place so then we can be in control of our money versus our money just pulling us around." Document all of your fixed costs – like your rent or mortgage payment, car payment, insurance premiums, and so on – before figuring out where you'll direct the rest of your income.

Pregnant people should also take a close look at their healthcare plan as soon as possible, Game says. Find out what maternity costs are covered, as well as what your deductible and out-of-pocket maximum are. "If you happen to be giving birth in a different year when open enrollment comes up, see if there's a more advantageous plan that you can move on to for the birth," Game says.

If you're expecting high out-of-pocket costs, you might also want to think about how you're going to pay them off. Game suggests looking into credit cards that offer zero-interest or low-interest payment plans for healthcare expenses. Many credit cards also offer the ability to plan out your payments over several months, interest-free, through payment plan features. Although no one wants to take on additional debt, sometimes it's unavoidable. "Just try to be as creative as possible if you do have to go into debt and get that paid off soon," Game says.

Next, Game recommends creating a monthly and annual spending plan for the excess money leftover after your fixed costs. Soon-to-be parents can make a list of each of their baby-related costs, then start saving towards each of those small goals.

"For instance, if we know that our out-of-pocket max on our healthcare plan is going to be $6,000, we could pretty much assume we're probably going to end up paying $6,000 for childbirth," Game says. You might decide you want to splurge on a high-end stroller, or maybe putting money aside for childcare after parental leave ends is your priority. This saving strategy could even help you work toward larger goals, like saving up to buy a bigger home for your growing family.

Whatever your goals, Game suggests setting up separate savings accounts for each item. "With money, we're just trying to be as clear as possible, and we're also trying to make it as easy as possible," she says. "So once we have these buckets set up, then we can automate every month from our paycheck that money to go to those specific buckets." Spreading those savings goals over the entire pregnancy gives you nine months to chip away at them – making them easier to accomplish in the long run.

Game also says starting a family is a good time to reconsider your priorities for your money. Pre-baby you might have been putting a large chunk of your paycheck into retirement savings, or investing aggressively in the stock market – but with a family to plan for, it might make sense to reallocate your money.

"I like to give new parents permission to pause their retirement contributions or pause maybe some of their other savings goals in order to put more money towards the baby," Game says. "You don't have to do everything. A lot of times people feel really nervous about pausing their retirement contributions for nine months or a year, but in the grand scheme of things, it isn't the worst-case scenario."

If you're considering becoming a stay-at-home parent or switching to part-time work after parental leave, Game suggests trying to live off the lower income level before you actually make that change. "Practice that while you're actually with the one or two incomes that you have for a month and just see how that feels," she says. Getting a sense of how that change will impact your savings and spending before you're actually living it can help you make an informed decision.

Family planning and financial planning go hand in hand, so now is the perfect time to start having money dates with your partner, if you're in a couple. Game says soon-to-be parents should consider topics like how many times per week they'll need childcare, what (if any) enrichment activities like baby-and-me classes they'll want to attend, and how many family trips they will want to take in their child's first few years. Even if you only have these conversations for five minutes once a week, open discussions about money can help you become closer as a couple.

"Start creating that shared vision for your life going forward," Game says. "When you start having these talks and this language around money as partners, then it starts to become easier and easier to deal with tough money situations when they come up."