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5 Topics You Should Talk to Your Financial Advisor About Before Having a Child

July 03, 2016

5 Topics You Should Talk To Financial Advisor About Before Having a ChildIf you are planning to start a family, or have already started, you may be wondering how you can afford such a life changing endeavor. Sure there is plenty to do with setting up the nursery, determining what accessories you need, taking childbirth classes and so on, but are you also prepared financially? There are many young couples out there who are getting ready to have their first child. Here are a few things you should be discussing with your financial advisor before taking that next step. 

How to Build a Baby into Your Budget

According to the USDA, the average cost of raising a child today from birth to age 18 is over $304,000, inflation-adjusted.  That means that parents are spending over $16,000 per year on average to care for their child, with housing and child-care as the two largest expenses. These expenses vary depending where you live in the US. The USDA website has a calculator to help you estimate costs for your region.  Your financial advisor can help you build a budget to make sure you can handle the added costs. 

How to Plan for the Rising Costs of College

What about college? If you are expecting to send your child to college, start planning now. Do you want to cover their entire tuition, or do you expect them to take out student loans? According to, the average annual cost of college increased an average of 5 percent each year over the last decade. Today, you could spend an average of $39,400 for a 4-year degree at a public college or $134,600 for a private college. By 2033, when your child would be starting college, the cost for a 4-year degree will likely be closer to $94,800 at a public college or $323,900 at a private college. Talking to your financial advisor about starting a savings plan today could help you get a leg up on rising tuition costs and prevent placing a costly debt burden on your new college grad. 

How to Save for the Possibility of an Emergency

Do you have an emergency fund to cover those surprise expenses? Financial advisors recommend having 3 to 6 months’ worth of expenses in savings. We all run into emergencies now and then – the car breaks down, you need to get an operation, you get laid off from work – and we need to make sure there is enough money in savings to pay the bills in the event of an emergency. Your financial advisor can help you determine how much emergency savings is appropriate for your situation.

How to Protect Your Family from Financial Hardship

You should also evaluate your life insurance and disability income insurance coverage. You and your spouse’s life insurance coverage should be enough to ensure that your children will not suffer hardship if you or your spouse die prematurely. The exact amount will vary depending on your income and your specific needs. Disability insurance coverage may be available through work, or you may have to purchase it on your own. Since most people do not have sufficient sick-leave or vacation days to take off work to care for their newborn child, having disability insurance that covers maternity can help make up the difference.

Disability insurance will also protect your family from suffering financial hardship if you are unable to work due to an unfortunate accident. Your financial advisor can offer advice regarding existing life and disability insurance and also refer you to a trusted insurance provider if needed.

How to Have a Contingency Plan

Finally, you should have an estate plan. What is going to happen to your child if you and your spouse were to die suddenly? Who would care for the child? For young families, it is recommended that you have at least wills, powers of attorney, healthcare powers of attorney, living wills, and guardianship documents drawn up by a licensed estate planning attorney. Your financial advisor can refer you to an estate planning attorney to review or establish your estate plan. 

Talk to your financial advisor today to make sure you are prepared for the arrival of your newest greatest joy.