I'm a SUCKER for a cute baby video!
There's something about those gummy smiles and contagious laughs that make all of my maternal instincts kick in! I can almost smell the Johnson & Johnson through the phone!
But then, before I can even scroll to the next video, reality kicks in.
Kids are EXPENSIVE.
The bottles and bibs. Books and toys. And at some point, they'll be old enough to ask me for dinosaur shaped “chikky nuggets.” 😫
I want to answer the maternal clock that's ticking loudly in my ear, but my internal calculator is also crunching numbers at the speed of light.
Daycare.
Health Insurance.
College savings.
The list goes on and on…
Even the thought of all the new things we'd need to add to our weekly grocery run is enough to make me break out into a cold sweat.
Exactly how will those diapers fit into my already overflowing cart anyway?
After years of randomly worrying about the financial pressures that come with raising children, I finally decided to put the numbers down on paper and determine if children, and how many, could realistically fit in our future.
While things like daycare and diapers were obvious, there were a few expenses that I hadn't considered at all and a few surprising revelations about myself that I uncovered along the way.
If you're considering having children too, I’ve shared my budget template here. Feel free to copy and personalize to your own needs!
Let's walk through it!
Identifying Expense Categories and Owners
I decided to break expenses down into two categories - shared and personal.
In the template, the shared expenses appear on the main page. This section includes things like housing, utilities, pet expenses, and childcare expenses. They are the expenses required to maintain the household.
Separately, the template has two tabs to map out the personal expenses for each partner. In these tabs you would list expenses that each person plans to pay for 100% independently.
Depending on your current expenses, debts, and how you plan to approach finances as a couple, you may need to shuffle around a few of the items listed in each tab of the spreadsheet.
For example, we each have personal activities that we like to participate in (organizations, hobbies, sports, etc.) so we plan to treat those as personal expenses. Similarly, we have separated our budgets for personal events and trips.
A lot of my event budget goes to Beyonce concerts.
For this first phase, my recommendation is to only discuss what the expenses are and who will cover it. Don’t worry about calculating the actual amounts right now. Things can always be moved around once you are ready to dig into the details.
Mapping Out Child-Related Expenses
Next, we listed the potential baby expenses.
There are the obvious expenses like diapers and clothes, but there were a few expenses that I hadn't considered at all until I watched other family planning videos.
Things like:
Increased medical insurance premiums
Payments for doctors visits and prescriptions
Life insurance policies
Gifts (holidays, birthdays, etc.)
While it was stressful listing these things out, it was also calming to talk through how we would approach these things and doing it in a way where we wouldn’t find ourselves leaning on credit cards for Christmas and birthday parties.
To make the budget more accurate for us, I called to get estimates for daycare and health insurance, to fully understand what the financial impact would be.
As you can imagine, asking about baby expenses with no baby is a bit awkward.
“Hi, I'm calling to get information on your daycare prices”
“Great, how old is your child”
“Oh, I don't have any yet”
“Okayyyy… um when are you due???”
(silence)
I was confused. The staff was confused. But I eventually explained that I was doing research for my budget planning.
I discovered that the daycare closest to us was also the most expensive in the area (around 2K per month) and they had a year-long wait list!
I always assumed that our future children would go there, but suddenly that ten or fifteen minute drive to other daycares was looking like a good option!
If you don't feel comfortable calling, checkout Reddit or Facebook for daycare questions. You'll likely find some recent parents looking for good options. These posts can also be used to help estimate potential supply costs for things like diapers, formula, clothes, etc.
In addition to the baby-specific expenses. We also accounted for slight increases to our home utilities like water, gas, and electricity.
Calculating the Scenarios
We took the estimated child expenses and dropped them in the spreadsheet. First for one child, and then adding a second column to account for potentially having two children under five.
If you hope to have more children, you’ll just need to add some additional columns and maybe discuss how far apart they would be in age as these age gaps would determine how long you would have overlapping expenses like overlapping daycare.
Making Tradeoffs
The budget numbers for two children were uncomfortable, to say the least!
With two under five, we would be spending more in daycare than we do on our mortgage.
Actually, it would be more than we spend on almost all household bills. 🤯
It was time to see what we would keep vs. cut.
While we could keep everything and try to make more money, it didn't seem healthy or realistic to put a lot of pressure on ourselves to dramatically increase our income in the next couple of years. The economy is too unpredictable and neither of us want careers that would require missing a lot of family time.
Here’s some examples of things we talked through:
Childcare options - I've generally been pro daycare because I believe children would benefit from the social interactions. But, after crunching the numbers for two kids, I can see also see the benefit of having a nanny instead or asking for family help, even if it's just part-time to cover the hours where we are both working.
New Cars - That new mom car I've been daydreaming about - the all black Cadillac Escalade with crème interior - off the list 😫! It just didn’t make sense to add car payments when both our cars are already paid off.
Post-daycare options - We're lucky to have lots of great schooling options in our area: public, private, charter, immersion, etc. To us, private school doesn't seem worth the financial strain it would put us (thousands of dollars each year) so instead we'll likely repurpose the daycare money into money for school activities and enrichment programs.
Aligning on Contribution Expectations
One of my favorite parts in the spreadsheet is the contributions section (in yellow).
It's a really good way to kick off a conversation about how each person will contribute financially and physically to the household over the years as you have children.
For example, maybe with child one you both would continue to work, adding the cost of daycare to your budget.
But with two children under 5 (about 4k in daycare expenses here), it may make more sense for someone to stay at home or to ask a family member for help.
The template is defaulted to 50/50 but you can adjust this percentage for each child and really discuss what your childcare and employment plans are as your family grows.
Tip: Also discuss potential income loss. What would happen if someone losses a job or becomes ill? Would the current budget be too much for one of you to maintain?
Figuring Out Next Steps
Ah, my type A personally is finally at peace.
With the budget mapped out, we then took a look at our target incomes (lines 46 and 47 for partner 1 and lines 52 and 53 for partner 2).
These lines factor in each of our contributions towards household and baby expenses, our personal expenses (from our individual tabs), estimated federal taxes and state taxes.
Reminder: Update the formulas based on your income tax rates. The current version has some rough numbers based on North Carolina.
Looking at the target incomes led to a conversation about career plans, growing our skills and if we would ever consider moving for work. It was reassuring to know that we actually don't need to climb the corporate ladder forever if we just manage money well and maybe sacrifice some of our personal splurges.
Suddenly, having kids felt doable!
Are there some things we need to improve to be financially prepared for kids? Yes!
But, we are much more prepared than we thought and the conversations around tradeoffs and priorities really helped me see how much we want to be parents and how selfless we can be.
If you’re thinking about having kids, check out the budget and let me know what you think! Did anything catch you off guard?
If you’re already a mom, did I miss any potential expenses? Are there any costs that people tend to underestimate?
Let me know in the comments below!
Note: The information provided in this post is for general information purposes only. It is not intended to be financial advice. Readers are encouraged to do their own research and consult directly with a financial professional to determine their individual needs.
