One thing I did not truly appreciate about the cost to have a baby, personal finance, and parenthood, is the increased mental load that happens when you become a parent. I became a first-time mom after many years of infertility in 2019, and while I was over the moon to become a mother, I also had no idea what I was in for. Suddenly, many more of the fears and doubts parents had expressed to me over the years of being a personal finance blogger became so much more real. The good news is: you can be very successful in personal finance even if you have kids.
The most important thing is not to compare yourself to a family with no children. More humans = more mouths to feed, so progress is going to be different.
COST TO HAVe A Baby: 3 ways to Help achieve long-term financial success
1. Focus on paying off your debts and reach financial freedom
In general, I would like to see you pay off all debts with 5% or higher interest rates early. This includes credit cards, student loans, personal loans. In my opinion, the loan does not matter, the interest rate does. Debt creates a drag – it uses up cash you make today, and if you don’t pay off debt, it delays your ability to save and invest for the future. Debt does not have to be forever. And you also do not need to feel shame over having debt. Many people enter debt for reasons beyond their control. The best way to pay off debt is the simplest – lower your expenses, really track and be intentional about what you’re spending, and raise your income (by side hustling, selling items, renting out a room in your home, or negotiating higher pay). Tools like refi, consolidation, forgiveness, balance transfers, are just bandaids. They don’t necessarily solve the underlying debt fully. And as you pay down debt, remember to celebrate each milestone along the way!
2. Prioritize your retirement over paying for your childrens’ education
What people don’t appreciate about retirement investment is that most of compounding interest happens at the end. In the beginning, investment growth feels slow. 10% growth off of $100 is $10… not a lot. But 10% growth off of $100,000 is $1,000 – that is meaningful. However, if you spend a lot of your savings now on your children’s education and don’t take care of your own retirement, you hurt your family in two ways. One, you may create a situation where your kids will have to take care of your in retirement when their own careers are just starting out… when they’re not earning a lot of money. In addition, your children get education before you retire. Money saved and invested for your retirement has more time to grow, and more potential to be a larger number. By prioritizing your retirement, you actually end up creating more wealth for your entire family. Your money has more time to grow exponentially, and you’d have more wealth, from which you can also help your children.
3. Talk about money!
One peculiar thing about American society is just how secretive we make talking about money to be. Why is that? I haven’t really found an answer other than “it’s rude”, which does not make sense to me. It should not be rude to discuss a very vital thing that drives how we live! I hope that you as a parent normalize talking about money, how much things cost, how to track your expenses, and how to build wealth around your children. Even if you feel like you don’t know all the answers, by showing that you’re learning and not afraid to fail, is already a great example for your kids. The more you normalize money talk, the more financially literate your children will be.
Shang is a personal finance blogger who is passionate about helping every day people learn how to save a retirement and live with dignity. She can be found at savemycents.com and on Instagram at @savemycents