Are You Financially Ready to Be a Parent?Raising a child can be both the greatest challenge and most rewarding experience of a person’s life. But how do you know if you’re ready to be a parent? While many factors go into parenting, one of the most important is your financial health, as it’ll underpin your ability to support your family. With the cost of raising a child currently estimated to be $233,610 before college, you’ll want to make sure you feel confident that your finances won’t get in the way of you being the best parent possible; here’s how you can make sure that doesn’t happen.

What goes into building your financial foundation?

If you think of building a family like building a house, then your present financial situation is like the foundation upon which your home will be built. Having a child while you’re undergoing financial stress is like building a big house on a faulty foundation. That’s why it’s imperative you wait to have children until you’re both emotionally and financially ready. Here’s a checklist of items you should consider when assessing your financial foundation:

Do you have a stable source of income?

A big part of having a robust financial foundation comes from having a regular income that ideally is paid biweekly or monthly. For most people, this means having an employer and working a decent job paying a stable salary, although it is possible to get income from other sources in today’s world, since the sharing economy and the Internet allow you to freelance or even start your own business. Be aware, though, that the less regular your income source is – for example, freelancers aren’t paid a salary and their earnings can fluctuate – the more difficulty you could potentially face raising a child. Jobs also provide another advantage in the form of employee benefits, such as retirement accounts, health insurance and life insurance, as well as other benefits and services that might be a little difficult to access or manage on your own.

That said, not even salaried jobs grant complete financial certainty, as companies downsize, job roles change and companies may even pack up and leave. Remember that your job isn’t an unconditional guarantee that you’ll never go a month without income, but you can do your best to make sure it feels stable and that you’re gaining skills to transfer to a comparable or related position if the need arises.

What does your savings look like?

Because absolute guarantees don’t exist in life, it’s important to save, not only for retirement, but also for emergencies and unexpected expenses. Online savings accounts are a great way to do this, as they allow you to have money that you can access whenever you need while getting higher-than-average earnings from interest when compared to traditional banks.

The exact amount that you should set aside will depend on your specific demands. You should evaluate your mandatory monthly expenses and ideally save three to six months’ worth of pay so that if you lose your job, you don’t find yourself in trouble. You might want to keep additional money available for other specific purposes like vehicle repair, surprise hospital visits or other unexpected costs you think could impact your family.

It’s important to note that you don’t need to save for every single surprise expense you can imagine. While keeping money on hand in a savings account allows you to quickly react to emergencies, leaving too much means you’re potentially losing out on the opportunity to grow your savings with other types of investments that pay more interest. It’s best to keep the bulk of your emergency fund money in a savings account; however, it might make sense to put some of you additional savings in other types of accounts, like a certificate of deposit (CD), a mutual or retirement fund or directly into your brokerage account if you have one. Money in these types of accounts can be less accessible than cash in your savings account, but you can use these accounts to help replenish your emergency fund over time (if needed) or just set aside some money for the future, like your child’s college.

Does your budget allow you to be flexible?

Having children might mean making financial sacrifices, something that your budget needs to be ready to accommodate. Part of this flexibility will come from having an emergency fund, but it might also come from learning how to save and plan for the future. Also, taking advantage of credit card rewards, like those that earn you cash back at grocery stores or on gas, can go a long way toward helping you save a bit of money on purchases you were already planning to make. Not sure where to start? Our list of the best credit cards for new parents can help.

Aside from saving, the other aspect of financial flexibility comes from avoiding debt. Because debt is a financial obligation all its own, it’s something that you don’t want to dictate your finances. While realistically it might not be possible to be debt-free, you’ll want to have as little debt as possible and not go out of your way to take on debt that you can’t readily pay off. The only exception to this is good debt. These are expenses, like buying a home or education, which will, in theory, pay for themselves and provide an overall positive monetary value in the long run. But even in these cases, buying a house before you’re ready or paying for an education before you or your child is prepared for school could mean that you won’t get the most out of what you’re paying for.

If you’ve taken most or all of these considerations into account, then you’re probably financially ready to be a parent. For additional advice regarding your financial life, keep reading our personal finance blog.

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