With a new baby, you get the unlimited adoration, late nights, all the well-wishing and an accompanying roller coaster of emotions. A new baby also brings a serious financial shift, whether the parents are single or coupled.
Shannon Kolakowski, PhD, a clinical psychologist and author (who is also a new mother) based in Bellevue, Wash., says that the new financial reality new parents experience can often be unexpected and soul-quaking. Money issues come to the forefront of the relationship.
And Baby Makes Three
"You may go from a two-income household to a one income household. Planning ahead and having savings to use for this time period is ideal. Taking stock of where you stand, and getting on the same page about it with your partner is paramount," she says. "If financial discussions are causing tension or you and your partner are having trouble agreeing on a financial plan, enlist a neutral third party, such as a financial planner or a psychologist to help give you guidance and lessen the strain. Having a baby brings a certain amount of uncertainty, so you want to have a stable base to launch from. Knowing that you can discuss financial changes or concerns with your spouse will provide you with a solid foundation."
Where Your Money Will Go
Kolakowski says these are the critical issues that will crop up once you bring a baby into the picture:
- Short- and long-term expenses: With a new baby, luxury expenses such as dining out and taking vacations will probably move down the list of priorities, replaced by hospital bills, designing a nursery, clothing, and baby gear. You'll also factor in planning for the child's education (who contributes, and how much?), finding daycare or a nanny, or changing schedules to care for the baby.
- Childcare: Kolakowski says that this is the time to listen closely to your own instincts, and drown out the noise of everyone else who has an opinion on daycare vs. a nanny vs. staying home . "Allow yourself flexibility to change the care situation once your baby arrives," she says. "You may think you'll want to go back to work right away after leave, but find yourself wanting to stay home with the baby for the first year, or vice versa. Try to create several options for yourself and your family, so that when the time comes you have room to maneuver, and a plan of how to make it work."
- Yours, mine, ours: While splitting costs 50/50 may have worked before, a baby can change the dynamic. It's time to move more into the "ours" pile. "A great deal of separating out can lead to power inequities or resentment. But when each person considers the needs of the family as a whole in financial decisions, it creates an atmosphere of appreciation and respect." This might mean a shift in how much you're putting away in savings or for retirement, tax benefits and consequences, or how much you invest in home-improvement projects, for example.
When You're Flying Solo
Financial planning becomes even more critical when you're a single parent, as you don't have an extra paycheck during the lean times. Now is the time to bring in a financial planner and set goals, Kolakowski says. "This typically means paying off any debt and resolving credit issues, planning your monthly savings for retirement vs. monthly spending budget, and managing or making long term investments with your capital, plus planning for your child's education."
She suggests lining up emotional and logistical support as early as possible, by tapping social media networks, friends and family members. "Join a parents' group online or find other parents through your hospital's educational classes as a place to start. Go for walks in your neighborhood and introduce yourself to other parents or expecting parents you meet," Kolakowski says.
"Knowing that you and your child will both be dependent on you financially can be overwhelming, but it can also be very fulfilling and rewarding. You are setting an example for your child of how to balance life responsibilities along with taking time to enjoy life and be with your family. By being prepared, responsible, and thinking about both of your financial interests, your child will have you as a role model to look up to as they grow and learn about money."
Keep an Eye on the Prize
Whether you're single or coupled, you'll soon find a lot of people trying to sell you expensive goods and services you probably don't need. Don't cave to marketing pressure, Kolakowski says. "I'd encourage parents-to-be to reflect on their values in terms of what's important and spend your money according to your values."