9 Year Mortgage: Financially Planning for a Child
Before becoming parents, couples should organize a plan for financially being able to take care of a baby, beginning with three steps.
One of the biggest costs of being a parent these days is child care. Day care and nannies can cost more than a couple is prepared for. For example, in Mississippi, day care averages around $4,600, but in Massachusetts it is more like $15,000 a year. Most would-be-parents do not have a clear plan to pay for child care, but 9 Year Mortgage suggests that they should create one using three steps:
First, decide what kind of care the child will need. Will the child be put in a day care center? Or maybe a family child care home? Will the child need a nanny? These are questions to ask and to discuss in the partnership. After figuring out the costs for child care (average costs for day care and nannies can be found online), 9 Year Mortgage suggests that a couple should put that much money aside every month for at least 6 months to test out the waters for living on that much less. It is important to know if absorbing the added financial pressure is doable. It will also give a nice buffer down the road to have that extra money saved up before the baby is born.
Second, determine out-of-work income loss. After a child is born, most families have a significant loss of income, because one parent will typically stay home to take care of the baby for three months or more. This should be something to think about and save for, long before the baby is born. Figure out how much you will not make by having one parent not working, and save that much money beforehand. 9 Year Mortgage also recommends checking with both of your employers whether paid days off are available for maternity leave, and how many you can take. Be aware that depending on the status of the job being left temporarily, the employer may be willing to be flexible on work hours to get a new parent back to work sooner.
Third, assess child care costs against probable income. Take time to compare the cost of child care with the income of the lowest-wage-earning parent. In a lot of cases, the cost of child care is more than that salary, and financially negates working outside of the home. By paying more for child care than said parent is making at their job, it would be more cost efficient for that parent to stay home and take care of the child themselves, and not have to pay someone else.
For many parents, working outside of the home is a mental and emotion necessity, even if that means being less smart financially. Perhaps consider working only a few hours, just to be able to stimulate the need for adult human interaction in the work place, but spend the majority of the time at home, saving money and taking care of the child. At 9 Year Mortgage we recognize that to be successful, a plan for child care needs to include not only financial, but emotional components as well.
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