The $204,000 Question: Can you ever afford to have children?

One piece of advice stuck in my head when my husband and I decided it was time to start “trying” for a baby: my father’s directive, “If you’re waiting to be financially ready to have a baby, you’ll never have a baby. So just have one!”

Turns out the experts are on his side. The numbers are daunting – but odds are you can make it work. In this report (pdf), the USDA estimates a middle class family will spend more than $204,000 to raise a child to adulthood (not including college tuition).

Considering a middle-income family makes an average of $61,000 before taxes, it’s not hard to imagine few have an extra $204,000 lying around. It’s no wonder a Charles Schwab/Baby Center survey in 2007 found that forty percent of women delay pregnancy because of financial concerns.

But that hasn’t stopped babies from coming. According to the National Center for Health Statistics, that same year mothers aired their financial dirty laundry was the year the United States had its highest number of births – ever. In 2007, there were 4,315,000 children born. That’s 15,000 more births than the peak time of the baby boom in 1957.

Were any of those parents ready? Maybe, maybe not. The good news is, you can be – even if you aren’t right at this very moment. We spoke to a slew of experts and came up with these seven key steps to easing your pre-baby financial anxiety.

1. TALK HONESTLY WITH YOUR PARTNER ABOUT MONEY

Couples who traditionally keep their finances separate or don’t talk much about the division of costs have more trouble having an open and honest discussion about what’s to come. Now’s the time to throw pre-conceived notions out the window, along with privacy concerns. “A baby changes everything about your life – sleep schedules, priorities, your social life, your financial status, and the primary couple relationship,” says California psychotherapist Tina Tessina, PhD., author of Money, Sex and Kids: Stop Fighting about the Three Things That Can Ruin Your Marriage. “These changes happen overnight, because the day a baby is born, everything is different from the day before. There is no way to accurately predict how these changes will feel, and the learning curve for new parents is very steep. Planning ahead for what you can anticipate, like finances, helps make the transition easier.

Whoever takes the lead in finance for the couple can take the lead in the family finance discussions too, starting by pulling up each partner’s credit report to get a good accounting of their financial situation. The report – available free yearly via AnnualCreditReport.com thanks to the federal Fair Credit Reporting Act – will show you how fit you seem to the financial world. Fiancial advisors like Suze Orman can provide you with strategies for upping your FICO score even if you don’t raise your income. (These include paying bills on time, raising the ratio of credit to debt, paying off high-APR credit cards, and fixing errors on your report.)

3. ESTIMATE YOUR POST-BABY INCOME

Meanwhile, Lucy Duni, vice president of consumer education for TrueCredit.com by TransUnion, calls for every couple to draw up a budget. “Everyone has the ‘nice to haves’ and the ‘have to haves,’” she explains. “Start with the nice-to-haves and see if you can go without.” If you are considering living on one income after the baby comes, try living on one income before pregnancy to see if it’s feasible. Set aside that second income in a savings account. Financial experts advise every American have at least three to six months living expenses in a separate savings account at any given time in case of job loss or other emergency, but a Bankrate survey showed fewer than four in ten do. Now’s the time to make that happen, Duni says, and ideally to add an extra cushion for family emergencies.

4. RESEARCH YOUR EMPLOYERS’ FAMILY LEAVE POLICIES

Try living on one income before pregnancy. Now’s also the time to find out what employers offer during a maternity or paternity leave – even if both parents plan to return to work after the baby is born. The Family Medical Leave Act requires parents be granted up to twelve weeks leave without risk of losing their jobs, but there is no requirement that they receive a paycheck during those twelve weeks. Some businesses provide a disability benefit, but even that is well below the average salary.

5. CHECK OUT YOUR HEALTH CARE BENEFITS

Couples need to explore the pregnancy and pediatric costs associated with their health insurance plans. Will they cover prenatal care, delivery in a hospital with a private room? Will the baby be added to the plan at birth, or will that take some time? If your employer doesn’t offer an affordable family plan, now is the time to look at your local children’s health insurance program to determine what out-of-pocket medical expenses might be both immediately after the birth and as children grow and require well visits to the pediatrician (as often as monthly during the earliest stages of life).

6. CALCULATE CHILDCARE COSTS IN YOUR AREA

The final piece of the puzzle is a look at the expenses that make up that $204,000 figure from the USDA – diapers, shoes, jars of baby food, extra rolls of toilet paper because your toddler is fascinated with the flushing action of the toilet. The answer? There is no one set figure for every child. “That frustrated me to no end when I was pregnant,” Erica Sandberg, author of Expecting Money: The Essential Financial Plan for New and Growing Families, says with a laugh. “Two words I loathed when I was pregnant were ‘it depends.’ I think what parents crave is to know exactly how much it’s going to cost. They need to know diapers cost, say, $75 per month.” So cruise the baby section of the local supermarket and quiz other parents. Just as you’d ask an experienced mother about breastfeeding or picking out the right stroller, ask how much they spend on diapers, on bottles, on clothing.

7. HAVE FAITH IN YOURSELF

“Two words I loathed when I was pregnant were ‘it depends.’” “No matter where you are, you can make changes, become financially ready,” Duni says. “You shouldn’t feel intimidated to sit down and take that first step – these are YOUR finances. If you are in a more challenging credit situation, give yourself six months to put yourself in a better situation. There are no quick fixes, but everyone can do it.” Duni and her husband had no guarantees when they had their child, nor did Erica Sandberg and her husband when they had theirs. They all agonized, but they all made the jump. “I think fear is healthy,” Sandberg says. “No, no one is every one hundred percent ready, but you can get close to it, and close to it is good enough.”

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