3 Critical Money Shifts You Need to Make When Preparing to Grow Your Family

Vanessa McGrady, Contributor, Forbes
December 28, 2018

When planning to welcome a new baby into your family, preparing for your new financial reality is critical.

A little attention paid now to matters like saving for future college tuition with a 529 plan and preparing your own finances for the new responsibility can go a long way. Learn more about First Republic’s top three recommendations for soon-to-be parents below.

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,” says Shannon Kolakowski, PhD, a clinical psychologist and author (who is also a new mother) based in Bellevue, Wash. “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.


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 versus a nanny versus 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 versus monthly spending budget, managing or making long-term investments with your capital, and 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.”

This article was written by Vanessa McGrady from Forbes and was legally licensed through the NewsCred publisher network.

The views and opinions expressed in this article do not necessarily represent the views and opinions of First Republic Bank.