Having children: good for the family, bad for the pocketbook

I have often joked about how my father presented me with a bill for $250,000 immediately after my college graduation. He explained that it represented the cost of feeding, clothing, raising and educating me through college. Unfortunately for today’s parents, $250,000 would barely cover their children’s expenses through high school, let alone college. While many couples will carefully consider their options and weigh their finances before purchasing a home, far fewer take the necessary steps to ensure the affordability of raising a child, especially when the long-term expenditures for the child would probably exceed the amount spent for housing over the same time period. As a result, we often meet with young couples who are struggling with increased expenses and reduced income in the wake of a recent childbirth. While our firm cannot make the task of parenting any easier, we can offer some guidelines to consider when making the decision to enlarge your family. Hopefully, these suggestions can prevent a post-birth visit to a bankruptcy attorney.

  • Double-check your health insurance to determine what is, and is not covered. Some policies have limitations on the extent of hospital stays, as well as differences in coverage for the mother, as compared to that which is necessary for the baby. Also make sure that your doctor, and the hospital, are participants in any type of health insurance plan. Finally, make sure that any pre-certification requirements are completed well in advance. You don’t want the baby to arrive before the certification paperwork does.
  • For the mother, verify the maternity and leave procedures for your employer, and make sure that you fully comply with any documentation required by your employer.
  • Once the child is born, you will need to take all necessary steps to add them to any existing health insurance coverage. But ahead of time, you should determine if any additional coverage may be necessary, and how much it will cost.
  • If the mother plans to remain home for an extended period of time, make sure that the household can function on just one income, whether temporarily, or permanently. The couple should review their monthly budget together, and make adjustments for the additional costs of raising a baby.
  • If the mother plans to return to work, investigate the cost and availability of daycare well in advance. Consider convenience, affordability and reputation. Many new parents are overwhelmed by the expense of daycare, especially when it almost exceeds the take-home pay of one of the parents.
  • Ask your employer(s) if they can adjust your schedule to allow more flexibility and time with the new child. Many employers are willing to make such concessions to valued employees during a child’s early years. However, don’t abuse it, and remember that your compensation may be reduced accordingly, and/or other employees may be doing extra duty to afford you the extra time.
  • Share the responsibility of taking the child to the doctor, day care, etc. Excessive tardiness and/or absenteeism will often be grounds for termination, no matter how justifiable the reason.
  • Start a savings account for education expenses, and get in the habit of making monthly contributions, no matter how small. Often, a monthly transfer can be initiated by your bank or credit union out of your checking account and into the savings account. Once the money is in there, don’t touch it!

While this list is not inclusive, it will hopefully generate a constructive dialogue among the future parents, and the creation of an intelligent assessment of the cost and time necessary to raise a child. Parenthood is a daily struggle in and of itself. Don’t compound it by making it a financial struggle as well!