Financial Planning for a Growing Family

Written by Casey Franken, Director of Planning and Advanced Solutions


The decision to add a member to your family is serious, and its implications stretch far beyond your finances.

Nevertheless, would-be parents have a responsibility to each other and their descendants to consider the timing as it relates to the family’s financial picture. 

Generally speaking, sacrifices can almost always be made to afford a child. 

In my personal view, few things in life are more worthwhile.

So, let’s say you are considering or have already decided to grow your family — What questions must you answer beforehand to keep your family on a wealth-building path?

As a new father of twins, these questions have guided our decisions toward proactive money management.

Let’s walk through them together.


How much should I estimate for child expenses?


I wish I could provide an exact number for you to punch into your budget (wouldn’t that be nice?), but the obvious fact is that it will look differently for each family.

My first piece of advice is to talk with friends and family who have recently had a baby or adopted a child. There’s a good chance that your relative income levels and spending behavior are similar, which means a more accurate estimate for you.

Depending on their transparency, you can even be so bold as to ask about the line items in their budget related to child expenses. It’s easy to forget an item or two when you’re budgeting, so this helps to reduce that chance.

Here’s a list of expense items to get you started.


Description Estimated Annual Cost
Medical bills (prenatal visits, delivery) $5,000 – $11,000
Nursery items $500 – $2,000+
Transportation (car seat, stroller) $200 – $800+
Clothes $240 – $600
Diapers + Wipes $480 – $960
Formula $600 – $1,560
Entertainment (toys, books, etc.) $200 – $400
Child care $5,000 – $10,000
Total $12,220 – 27,000+


Remember, these are ballpark figures and fluctuate greatly depending on the price of your taste. You would be wise to conduct your own research and budget accordingly.

The last cost to consider, which I did not mention above, is the cost of lost income through either paternity or maternity leave. The Family and Medical Leave Act (FMLA) mandates that employers provide 12 weeks of unpaid leave upon birth. Of course, you don’t have to take all 12 weeks, but it’s helpful to know you have the option.

Make sure you have a plan in place to replace or supplement your income during these initial weeks if needed.


Should one parent stay home?


This is a very common, yet difficult, question for many parents.

Though the decision hinges on more than financial factors, these are a good place to start. Some families may not be able to afford having one parent stay at home, which can save them from an internal debate in the first place.

Begin by evaluating each parent’s compensation compared to the cost of child care. When evaluating compensation, be sure to include the entire compensation package — i.e., wages, insurance, retirement plans, and so forth. 

Though the cost of child care has undoubtedly soared in the United States, it will still likely make more economic sense for both parents to work part- to full-time. 

Now, that is not to suggest that neither parent should stay home. There are many additional financial factors to consider, and new parents must weigh these against their future financial outlook to come to a wise decision.

Our firm is a champion of True Wealth, which we define as everything you have that money can’t buy and death is unable to take away.

As you embark on the journey of parenting, you will certainly discover newfound “assets” outside of your investment portfolio.


How can we save for future college education?


Our advisors at Pinnacle Wealth have this conversation with clients on a regular basis.

We generally recommend a multifaceted approach. 

This would incorporate both tax efficient plans, such as 529 education accounts, while also utilizing flexible savings plans that do not incur penalties for withdrawals outside of educational purposes (e.g., if the child receives a scholarship or grant, or decides not to attend college).

For a personal example, my fiancée and I are dedicating savings for our boys’ college educations, but we still plan on having them take out subsidized loans since the interest would not accrue while in school. If they work hard in school, we will look to pay off some of the debt with our dedicated savings; Alternatively, if they make poor decisions while in college, they will be required to pay the entirety of the debt.

By having some skin in the game, we believe they will be motivated to pursue excellence and not consider their education a “free ride.”

We understand this plan may not be for everybody. Nonetheless, our team at Pinnacle Wealth strongly encourages new parents to consider their education savings plan before the new member sets foot in the home.

As with any form of saving and investing, time is your best friend.


What else should we consider?


Aside from the budgeting and saving principles mentioned above, you should consider drafting a simple will, designating a power of attorney, evaluating life insurance needs, and crafting a long-term financial plan to make sure your family’s bases are covered in any scenario. 

These are all services our Wealth Advisors help facilitate.

There is no better time to take care of these important matters than before the arrival of a new family member.

Planning for a growing family requires a confrontation with the future. 

As a new parent, you have no choice but to consider your family’s long-term goals and the legacy you hope to leave for your children.

The wisest of parents will begin by defining their family’s version of True Wealth and setting their compass accordingly. 

Answer these questions appropriately, and you will certainly be headed on the right path towards True Wealth.

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