Q: My partner and I are looking forward to starting a family, but when we sit down to crunch the numbers and we see how much it costs to raise a child, we immediately put our plans on hold. We don’t see our financial situation changing anytime soon. Is it ever the right time to start a family?

A: It’s commendable that you’ve chosen to think about how you will afford to care for and raise a child before the pregnancy test comes back positive. 

According to the U.S. Department of Agriculture (USDA), it costs $233,610 to raise a child to age 18. When adjusted for inflation, that number is closer to $288,094. It’s a massive budget that may seem unattainable right now, but that doesn’t mean you need to delay starting a family until you have all that money saved.

Let’s explore the financial details of starting a family and some steps to take for financially preparing yourself for this exciting and monumental step.

The real cost of raising a child

First, let’s take a closer look at the estimated cost of raising a child from birth to age 18. The USDA’s average, as mentioned above, is approximately $288,094. This number includes ongoing costs like housing, childcare and healthcare, but it does not include the cost of college. 

It’s important to note, though, that this number is only an average. Costs can vary tremendously with each family. For example, the USDA’s average annual housing costs of raising a child is $3,900 in an urban area, but only $2,400 in a rural area. Each family will also have its own spending habits in other areas, like food, transportation and entertainment. Therefore, you may want to do some of your own research to find out what it will likely cost you to raise a child to adulthood.

Another important point to consider is that you do not need to have all these funds available the day you bring your baby home from the hospital. Of course, some costs will need to be immediately incorporated into your family’s budget, but most of these expenses are spread across 18 years. This comes to an average of $16,005 a year, and $1,334 a month. Breaking down the numbers makes them a lot more manageable.

Now you’re ready to determine if you’re financially ready to start a family. 

Assess your current financial situation

Before you start stressing over baby costs, take a good look at your current financial situation. Review each of these components of your financial health:

• Income streams
• Ongoing and occasional expenses
• Outstanding debt
• Debt-to-income ratio
• Emergency funds
• Long-term savings and investments
• Assets

If you have a monthly budget, review this as well. If you don’t have one yet, this is a great time to assign a dollar amount to all your monthly expenses. 

Assessing your current money situation will give you an idea of your financial health before you shake things up by bringing a tiny human being home.

Budget for new expenses

Next, jot down a list of baby expenses you expect to have when you start a family. Include one-time expenses like a stroller, crib and carseat, as well as ongoing expenses like diapers, clothing, food and childcare costs. You may need to do some research before arriving at an accurate number for each spending category. 

Once you’ve completed your list, incorporate these items into your monthly budget. You’ll likely need to make a choice to create room in your budget for these items. You can choose to cut all  discretionary expenses completely, to trim from several categories or to look for ways to boost your income. If drastic change is needed, consider a major career shift, such as going for additional training or looking for a new job.

Plan for future expenses

It’s best to plan for your child’s future expenses ahead of time as a means of lessening the financial burden. One way to do this is to create a savings plan for each expense. For example, you can set aside a certain amount each month for child care costs or start a college savings plan, like a 529 savings account.

Review employer policies

Lots of employers offer paid maternity and paternity leave for primary caregivers. This can lighten the financial burden for expectant parents and to ensure they have enough income to live on until they get back to work. Check the maternity/paternity leave policy at your workplace, as well as the policy at your partner’s place of work. If no paid time off is offered, you may need to apply for disability insurance.

Starting a family is a significant financial commitment, but with careful planning and preparation, you can ensure that you are financially prepared to welcome your new bundle of joy into the world.