Raising a family in the Ozarks gives you a blend of everything you need. Whether you're going hiking, fishing on Table Rock Lake, great schools, and low cost of living make the Ozarks a great place to settle down.
Starting a family comes with a lot of new adventures, and a lot of great times ahead, but what are the real costs associated with having kids and how can you prepare yourself to handle all the challenges that are coming ahead. The financial planning comes early, usually around 8-10 weeks when you start having monthly hospital visits. If you have good insurance, this isn't a problem, you get to see your baby for the first time, that's so exciting. If you're anything like me, you're already starting to think about how a new baby is going to affect your checking account.
As exciting as it is, you know you have to financially support the newest member of your family. Finally, the hospital bills are over and you have welcomed your new baby. In my case, a baby boy, who goes through diapers like crazy, eats all that he can and always could use a new outfit or two.
So where do we begin planning for starting your new family?
Let me take you through my first year cost estimate guide:
Year 1:
One-Time Purchases: $3,000-5,000 This number varies depending on whether you have a baby shower or not, and how many new items you will need to purchase.
Recurring Essentials (diapers, food, clothes): $2,500-$4,500 Again, this will depend on formula use/clothes you need to purchase, but this is a good starting point
Healthcare/Others: $1,500-$3,000
Childcare: $9,000-$13,000 The big one
Total: $16,000-$25,500
That's just an estimate for the first year basics, of course those numbers may be different for you and your family but that's a good starting place. Now, let's talk about where financial planning comes in for new parents. For this, I have created a checklist from my own experience:
- Create a new budget
- Make sure you have a solid emergency fund
Diapers, formula, childcare options, health insurance for your new baby, weigh the benefits of staying home with the costs of childcare and decide what makes sense for you and your family. It's also very important to review your emergency fund, some families find it's nice to have an extra cushion with a newborn. Typically we recommend 6 months expenses but I have found I pushed my number up a little bit when my wife and I had our child.
3. A life insurance review for both parents
4. Updated will with a legal guardian
5. Update beneficiaries
These three on the list aren't fun but they're necessary. Especially if you're young parents, these things seem impossible and they're difficult to plan for, but that's why you need to do it. You need a plan when things go wrong, and in the worst case scenario, you don't want your child grieving while also struggling financially. Give yourself and them a safety net in case something happens
6. 529 Plan, investments, preparing your child for life as an adult
This may seem like it's too soon, but if you decide to invest in your child's future, you should do it early. It gives you more time to let the money grow. With that, we have to weigh the benefits of a 529 plan like Missouri MOST 529 with the flexibility of a custodial account.
Here's the most important part of all of this: You can't pour from an empty cup
You know how when you get on a plane they always say to put your mask on before you help anyone else? Well there's good reason. It's the same in financial planning, you have to help yourself first. You can always get a loan for college, your child can work hard and save for their own retirement. If you reach retirement and realize all of your money went to saving and investing for your children, you can't finance retirement and you can't pour from an empty cup.
Enjoy the newborn phase, it doesn't last as long as you want it to. Just remember to be financially prepared too. Take care of your baby and yourself, stay in the moment and prepare for the future. Small steps now make a huge difference in 10 years, if you start early your child will be setup for success.