Having a baby will change your life in just about every way. That includes completely changing your financial situation. Kids are extremely expensive, and it's important to be financially prepared for a baby before bringing one into the world.
As part of your financial preparations, it's also essential to make sure you and your partner are on the same page when it comes to how money will be handled after your son or daughter arrives. After all, the last thing you need is to end up fighting about money or diaper changes when you're both sleep-deprived.
To make sure you're both in agreement about some of the important financial issues having children can create, consider having these four key financial conversations before adding a new member to your family.
1. Can we afford to have a baby?
Figuring out whether you can actually afford to have a kid is a good first step—so you both need to sit down with your budget and see what wiggle room you have. You'll need to factor in the costs associated with pregnancy, including insurance co-pays, maternity clothes and time off work both for doctor appointments and for caring for your new infant.
It's not just important to do this to make sure you actually can come up with the cash to keep your baby fed and clothed, you also want to make sure you're both willing to make any sacrifices necessary.
If one spouse is willing to give up dining out and slash the clothing budget to the bone to afford essential childcare but the other isn't, this is going to create a problem. It's far better to hash out that issue before you get pregnant so you can come to a consensus.
2. How will we share financial responsibility for the baby?
If you have joint accounts with your spouse, then it may be very clear that baby expenses will simply come out of your shared cash.
But if you and your partner currently have separate accounts and split household expenses, you should create a plan for how you'll share baby costs. This may mean a 50-50 split or, if one parent is going to assume more responsibility for childcare and his or her income will take a hit, the other parent may need to be willing to pick up more of the financial slack.
3. What will happen if one of us decides to stay home—or how will we cover childcare if neither of us do?
For the first few years of your baby's life, childcare expenses are probably going to be one of the biggest costs you face if both parents continue working. Make sure you can work these costs into your budget before having a baby, because the last thing you want to do is end up in debt when you find out you can't afford care.
You should also have a serious conversation about what will happen if one parent decides to stay home. Many parents plan to go back to work, but when push comes to shove, find they don't want to leave their baby, or the cost of childcare makes returning to work impractical. You not only need to know if it's possible to survive on one income, but also discuss how that will affect your lifestyle and the ways in which you share expenses.
4. How are we going to handle college savings?
It may seem early to worry about this, but college is just getting more expensive, so it's a good idea to have a plan in advance.
Get on the same page about whether you'll start saving right away, how much you'll save and how your other financial goals will be affected. It's important, for example, that you both agree not to prioritize saving for college over your retirement. While you may feel guilty about burdening your baby with student loans in 18 years, funding your retirement is more important unless junior wants you living in his guest room when you're 80.
Getting on the same page financially will make life a lot easier
Working together to address these financial issues will help you make sure you're actually ready to have a baby—and in agreement about how adding a new family member will change your financial life. Hash out the details before moving forward so you can both make the decision to have a child with your eyes wide open about what this will mean for your money.