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Finance Expert Says You Should Have $10K in the Bank Before Having Kids

Image source: Thinkstock
Image source: Thinkstock

How much should you save before welcoming a baby into the world?

According to Melbourne-based financial expert Scott Pape, you should have $10,000 in the bank — at minimum. In his blog, The Barefoot Investor, he wrote:

“The first 12 months of being a parent are stressful. You have no idea what you’re doing. there’s very little sleep. You basically surrender yourself and serve the baby. The best gift you can give yourself in that first year is not having to fight or worry about money.”

Now, we’d all like the luxury of having what I’ll call a “baby fund,” but is it truly necessary? Or more importantly, is it even possible?

Pape seems to think so. And while he admits that all the accessories a baby needs don’t come cheap, there are ways to cut the cost so you can put away more towards savings. He writes:

“I put more research into choosing a pram than I did into buying my first car (and I spent roughly the same amount). And when that state-of-the-art all-terrain stroller was destroyed in our house fire … I replaced it with a cheap and nasty $25 job from KMart.”

Isn’t it just a question of cutting your coat according to your cloth? Buying within your budget? Or asking friends and relatives to lend you anything they can? When I was pregnant with my first child, I was terrified about how we would afford a baby — especially when my husband lost his job six weeks before the due date. I asked a good mom friend to make an honest list of what I really needed (a crib, a stroller, etc.) and what I didn’t (a mobile, a baby bath, a bottle warmer, those special bay towels etc.)

Next, I asked everyone I knew if they had anything on the list. Yes, we’d all like to afford a matching crib, changing table, and high chair — but if you can’t afford it, it isn’t necessary!

I will admit, I got slightly carried away staring at cribs sets and fancy strollers and wishing I could afford to decorate a whole nursery; but the reality was, I couldn’t. I was happy to use eBay and get things I wanted at half the price as well as look on Gumtree for any bargains.

A baby isn’t going to stare up at you and ask, “Mom why don’t I have the newest jungle gym?”

And it is actually surprising how little they do need: I used my stroller chassis instead of a Moses basket, a little $2 seat to put my son in the bath instead of buying a baby bath, and I didn’t buy diaper bins or any unnecessary accessories.

However, where I think Pape has a point is in having some money saved to give yourself time with your baby before having to return straight to work.

In the UK (where I live), employees on maternity leave are entitled to 90% of their earnings for six weeks, and often employers then give the mom six months half-pay. However, when I had my son I was a self-employed freelance TV presenter, so I only got paid when I actually worked. And as luck would have it, the channel I was on shut down the week after I gave birth, so I had no job to go back to.

By then, I had only saved enough money to cover my mortgage and bills for three months. So in a mere 12 weeks, I had to recover from a C-section, get my figure back, find a job, and secure affordable childcare. Oh yeah — and look after a newborn.

To say I was stressed would be an understatement.

At my 6 week check-up, when the doctor gave me the all clear to go back to the gym, the appointment ran late and my son was yelling at the top of his tiny lungs. I ended up sobbing on the receptionist, who held him while I saw the doctor. Every day felt like a ticking clock and

I wished I could relax and enjoy time with my baby, but I didn’t have that luxury because I was stressed about our finances.

However, I, like Pape, am lucky enough to have public health care — so my three nights in the hospital, C-section, and 10 days of midwife visits after my son was born were all totally free. In the U.S., if you don’t have health insurance to cover you, you are looking at a bill of $2,600 on average for a vaginal delivery without complications, and C-sections cost $4,500, according to the Agency for Healthcare Research and Quality Healthcare Cost and Utilization Project.

However, vaginal delivery with complications — requiring an operating room procedure — has the highest average price tag of any type of birth, costing parents a whopping $6,900. Starting parenthood with such a huge bill hanging over your head isn’t going to make the transition to parenthood any easier.

Pape also forgets something crucial in his argument — oftentimes, babies aren’t planned.

Even if a couple have decided they want to try for kids, it doesn’t necessarily happen right away. I had one friend who had a £5,000 baby fund that she ended up having to put towards IVF in order to have her baby. (There’s a phrase that comes to mind when I think of all this: Want to make God laugh? Tell him your plans.) Often couples are having babies not that long after paying off a wedding or buying a house together – saving $10K on top of that feels impossible.

Also, some moms want to get back to work ASAP, not because they don’t love their babies, but being a stay-at-home mom honestly is possibly the hardest job out there. It left me feeling depressed and isolated. I loathed the baby happy-clappy classes and having to talk to moms who I had nothing in common with other than recently giving birth.

So having a fund to let me stay at home for a year? Thanks, but no thanks.

Ultimately, we all know there is never an “ideal time” have children; especially financially. And I’m pretty sure that if we all waited until we were totally debt-free with $10,000 sitting in the bank … hardly any of us would have kids!

Article Posted 2 years Ago

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