Episode 332 | Author: Emilie Aries

Having kids is expensive. The high cost of childcare, low availability of paid parental leave, and wildly unpredictable healthcare costs are just some of the reasons our birth rate is on the decline in a major way, especially for my fellow millennials, who already hold the record for being the most educated and indebted generation ever.

That said, I find the often-heard lines, “You can never be prepared to have a child,” or “You’ll never be ready to have a kid,” to be a strange way of coping with what feels like an impossible hill to climb. It strikes me as some kind of denial and a blind leap of faith.

Clearly, people have babies every day without a plan - financial or otherwise. So that is certainly one way to proceed. But for me, having grown up in a household where financial uncertainty and anxiety was the norm, I’ve spent the majority of my adulthood trying to find a more prepared path forward. To me, any amount of planning is better than tossing your hands up and accepting this false idea that you can’t prepare for this major life change.

Today I’m sharing how #BradtheBoo and I chose to proceed when it comes to financially preparing for our baby on the way.

First a few important disclaimers:

This is my personal experience, and may not be the right path for you. I am not a financial advisor, coach, or expert of any kind. So please consult your financial professional of choice when designing the right financial plan for you.
This whole thing is a gamble. The more time you spend saving for a child, the more you roll the dice when it comes to your own fertility, which is incredibly hard to predict. I was fortunate to have a relatively easy time getting pregnant in 5 months, but we all know of friends and family members who struggled to get pregnant - even at a relatively young age - and have had to shell out tens of thousands of dollars for IVF treatments, which only rarely are covered by insurance. I did find some peace of mind by testing my fertility with Modern Fertility at-home testing over 2 years ago, which didn’t uncover any red flags early on. But truthfully, you never know what your journey to conception will entail! So if it’s really important to you, you may want to move your timeline up by lowering the bar on your financial goals.
Our income: #BradtheBoo and I are fortunate to have jobs we love that compensate us well, and put our collective household income around $130,000 a year, although my income tends to fluctuate quite a bit, year over year. We have both earned more doing work we love less, so I consider it my lifelong goal to find the right balance between maximizing income and maximizing our lifestyle. Starting and running a business has been one of the hardest things I’ve ever done, and I do aspire to make more money in the future. But to me, the biggest benefit of running a business I’m so passionate about is the flexibility and lifestyle it affords me, not to mention the impact I get to be a part of having in this world.
Our cost of living: We live in a moderately expensive city - Denver, Colorado - but are fortunate to own our small, single-family home as well as a second rental property (which you can read more about here). This year, we took advantage of record-low mortgage interest rates and refinanced our primary residence into a 30-year mortgage, so our monthly mortgage payment is surprisingly low - about $1600 a month.
Our debt load: Brad and I both paid off our modest amount of student loan debt years ago (we graduated with about $52,000 in debt between the two of us). Currently, the only debt we’re paying down is approximately $14,000 in debt related to our real estate investing, along with our two mortgages. We consider real estate our long-term side hustle, and we’re interested in buying, renovating, and holding for the long term as part of our retirement savings plan. We only have one car between the two of us, and Brad bought his used Ford F-150 truck for about $13,000 in cash 4 years ago.
Obviously, everyone’s personal finance journey is different. The best thing I’ve ever done is educate myself, starting about a decade ago when I created my first-ever monthly budget. I have interviewed countless financial experts on the podcast, including my own financial advisor, Cris Caruso, and recommend if you’re just getting started taking charge of your financial future, that you take it one step at a time. The most important thing is that you start. I’ve become really obsessed with financial literacy and education now, and it’s completely changed my life.

Alright, enough disclaimers: let’s dive in.

Healthcare & Budgeting for Birth

My first step in budgeting for a baby was to try and get cost estimates from the two regional hospitals I was considering for labor and delivery. Finding cost estimates took some serious digging, but I did find local bloggers who shared their experience to be helpful for reading reviews and hearing about expenses, and the hospital billing departments were also able to provide rough estimates as well.

From there, I checked with my health insurance provider (Aetna) by reading my Explanation of Benefits (EOB) document to get a sense of how many out of pocket expenses we might incur. This process has proven to be maddening because despite lofty promises, such as saying that all Prenatal Care is covered at 100% with no copays, they continue to find ways to pass costs along to me for routine medical care.

For example, they claim that the initial ultrasound I received at my Nurse Midwife’s office at 12 weeks to confirm my pregnancy, was not “prenatal care” and instead is billed as just any other “outpatient diagnostic test.”

I’ve appealed that claim as well as many others which seem to be failing to live up to their proclaimed coverage (for which Brad and I pay approximately $320 a month per person), and the appeal process is equally maddening. I’ve already had them reverse at least one charge, however, so I’m reminded that sometimes putting in the extra time to fight wrongful charges can absolutely pay off.

I paid special attention to my annual deductible ($1,000) and annual “Out of Pocket Maximum,” which supposedly states that I shouldn’t have to shell out more than $4,000 during any given year. I’m grateful to have this coverage, of course, but skeptical, given how adept insurance companies are at making money by not living up to their promises.

So, about two years ago when we started getting serious about planning for a baby, I set a goal to save at least $4,000 in my Health Savings Account (which I opened through an online service I really like, Further).

HSA funds are a great way to save money in a tax-efficient account that you can also invest in the stock market if you so choose and watch your money grow in interest, tax-free. That said, you can only ever spend the money in your HSA account for medical expenses and the IRS limits how much you can save in your HSA per year. I’ve maxed out my savings for the past 3 years by putting aside about $300 a month ($3,500 annually) and invested half of those HSA savings in a Mutual fund that’s had a 25% return in the last year - pretty wild!

That’s left me with about $4,000 in cash in my HSA, which I’ve already started spending down to cover prenatal care expenses, and $4,200 invested in my HSA, which will hopefully continue to grow until I need to cash it out to cover out of pocket expenses once again if we have another kid.

Bottom line:

Healthcare expenses are significant and inevitable. Opening an HSA account is a great way to start saving. Start early, and put aside whatever you can on a consistent basis, and that cash will stack up faster than you think.

Funding Parental Leave

Last year, Colorado became the 9th state in the nation to pass a state-funded parental leave insurance program. While it’s not yet available, in the next few years, businesses like mine will be able to purchase insurance (for which we have to pay a monthly premium, just like health insurance) that every W2 worker in the state will contribute to, just like Medicare and Social Security. Many of the details around how much of a person’s income will be replaced when on parental leave, how much employers vs. employees will contribute, and how many weeks will be covered, are all still being worked out. Regardless, none of this is in effect just yet.

So for me, especially given that I’m self-employed, I have no other option than to self-fund my parental leave. That’s why I’ve been saving up a fund (in an AMEX high yield savings account) to replace my own paycheck for 12 weeks. I’ve been saving $400 a month for about 3 years to make this happen.

If my business is doing especially well when the baby arrives, I may be able to just keep paying myself from the business checking account, while still covering payroll for my 3 employees. But that’s difficult to predict and I don’t want to count on it. And frankly, I don’t want my business to be in a poor cash position the moment I return to the office.

The way I see it, the money is coming from one of my accounts - business or personal - either way. That’s why I started saving years ago to be able to afford myself the time off I want and the peace of mind that we won’t be financially strapped with a newborn. There are enough things to stress about with a new baby, and I really don’t want money to be one of them. If we spend less than what I’ve saved in those first three months - great! I’ll keep that fund growing for the next baby, if that’s something we end up wanting to do.

Brad’s in a similar spot when it comes to his parental leave. He works for a small business here in Denver that has no policies on the books as it relates to parental leave and has never had an employee have a child before. Brad’s goal is to take 4 weeks off entirely, then return part-time. He has made himself invaluable to his boss, the Founder of the company, who is open to negotiating some kind of paid time off, which they’re in conversations about now.

Bottom line:

Like so many Americans, there’s no safety net for us when it comes to financing our parental leave. We’re completely on our own, relying on years of sacrifice and saving, as well as the sheer luck we’ve had in not having to drain our savings to cover any unforeseen catastrophic expenses.

Childcare

At my second prenatal checkup around 16 weeks, my Nurse Midwife asked me if I’d started looking into childcare options. I couldn’t help but laugh at how ridiculous it is that in our nation, where affordable childcare is so hard to find, our healthcare practitioners are the ones ensuring we’re getting a jump start on figuring this puzzle out when our babies are barely larger than a plum in utero.

That said, Brad and I have, in fact, been reflecting on our hopes and options for childcare. Our goal is to hire a nanny three days a week to care for our baby in our home, and then have Brad take the baby for one work-from-home day each week - which will be significantly more childcare than work, and for me to do the same one day a week.

As a small business owner with a great team of full-time employees, I have a lot of flexibility to adjust my schedule as needed, and I doubt I’ll be as productive in the first year of our child’s life than I have been historically. I’m just accepting that now.

According to some quick research I’ve done, nannies in Denver charge between $20 and $25 an hour, so we’re budgeting about $2,400 a month for the childcare we need. That said, we’re also in talks with a few friends locally who are also expecting, and might be able to reduce our costs via a nanny-share agreement, where we’ll split the cost of one nanny caring for two infants. Either way, it’s going to be expensive. At around the 1 year mark, we’ll aim to put our little one in daycare full-time, which will likely save us about $1,000 a month in childcare costs.

We are fortunate to have my family nearby - both my parents and two younger siblings in their twenties moved to Denver from the east coast last year - but we’re trying to not rely on family for anything more than the occasional date night out, especially because my parents aren’t retired. That said, it’s a huge blessing to know we’ve got tons of built-in babysitters if we’re ever in a bind.

Bottom line:

Much like parental leave, there are few options for working families to find affordable childcare. Everyone seems to patch together their own imperfect solution. It’s hard to believe this is how it works in America - because it doesn’t really seem to be working at all. A plan for safe and affordable childcare reform is a prerequisite for any politician who wants my vote.

Baby Gear & Nursery

We’re keeping things relatively minimalist when it comes to preparing the baby’s nursery. Brad’s making us a changing table and crib (although I did buy a crib mattress), and I’ve been researching and shopping for everything else we’ll need to piecemeal things out, one month at a time, and keep expenses manageable.

Between using all those Bed, Bath, & Beyond coupons that come in the mail for 20% off, finding gently used baby gear on Facebook Marketplace, the generosity of my in-laws who offered to buy us a car seat, my mother who’s sewing us blankets and burp cloths, and other loved ones who are gifting us books and baby clothes, I’m confident baby is going to be all set.

I’m really trying to resist the whole baby-industrial complex that would have us believe we need tons of baby gear to feel prepared. You know what makes me feel prepared? Have more cash in the bank, that’s what. So I’m trying to exercise restraint when it comes to buying stuff. In fact, for the first few months especially, the mere thought of all the baby stuff we had to buy was really overwhelming.

That’s why I especially appreciated this pared-back list of essentials that was shared in a great book my Nurse Midwife recommended I pick up, The Mama Natural Week-by-Week Guide to Pregnancy and Childbirth by Genevieve Howland:

Additional items we decided our nursery needed including:

A rocking chair - I bought this one off Wayfair with a coupon!
And a humidifier / air purifier combo (I got this one off Amazon). This is especially important here in Denver not only because of the dry air and high altitude, but because fire season has resulted in poor air quality in the summers here lately.

Does all this add up? Absolutely. But I’ve never been more grateful for the fact that pregnancy lasts 40 weeks, because we’re going to need it! We’ve just been taking things one step at a time and buying a few items each month.

It’s also common practice for new parents to have a baby shower and accompanying gift registry, which can make a big dent in the startup costs to becoming a parent. Brad and I are feeling a bit rebellious on that front, though, and are taking an alternative approach. This July we’re hosting a backyard BBQ in celebration of our baby on the way with (all fully vaccinated) friends and family members. In lieu of gifts (frankly, because we already feel extremely fortunate on that front) we’re asking our guests to bring a pack of diapers, wipes, or formula with them for donating to a local nonprofit diaper bank here in Denver, that provides these essentials for parents in need.

Bottom line:

Babies certainly come with start-up costs, but couponing, checking out used gear, and accepting the generosity of your community can go a long way in getting you set up. You don’t need to get everything all at once - take it one step at a time to keep things from getting overwhelming.

Our Ongoing Spending & Saving

In case it isn’t already painfully obvious, I appreciate the power of a plan when it comes to my finances. So I’ve already created my household monthly budget for next year with the assumption that our incomes don’t rise at all, to see how our spending and saving will have to change. Obviously there’s so much in life that you can’t predict and we don’t know what the future holds, but it feels reassuring to at least have an educated guess listed out in black and white so we can project how things might go.

Our new monthly costs:

Childcare: after parental leave is up, we’ll probably spend somewhere around $2,400 a month on a nanny.
Groceries: I’m planning on breastfeeding for a year if I can, but increased our grocery budget to account for the additional food we may as well as diapers and wipes.
Healthcare: babies go to the doctor pretty often and we’ll also need to budget for a family premium on our health insurance plan.
A second car: It has been so wonderful being car-free for almost a decade now, but I’m pretty sure that by the time baby comes, I’m going to want my own car and not rely on sharing Brad’s truck with him as needed. This is especially true since I won’t be flying for work as much as I was previously. I’ll most likely finance this purchase and will have to account for $400-$600 a month in car-related expenses.

Our new monthly savings goals:

College fund: while many new parents save for baby’s college via a 529 fund, we’re not into that approach. Real estate is our biggest investment strategy, so we’re skipping the college fund altogether in favor of prioritizing our real estate investing.
Our next down payment fund: our biggest priority will be to keep paying down our real estate debt and save for our next down payment, as we anticipate the 900 square foot house we’re in right now to feel pretty cramped in the next year and are already starting to think about our next move.
Retirement, Emergency, & Vacation fund: Other than that, we’ll continue to put aside a few hundred dollars a month to our retirement funds, our emergency fund, and our annual vacation fund to keep those priorities moving forward, if perhaps a bit slower than previously.

Things will certainly be tight - especially so long as our incomes remain flat and our childcare costs are so high, but this period won’t last forever.

I know talking in detail about money can be a real turn-off for some folks, but I hope that by sharing my experience honestly I can demystify how we’re hoping to make it work in a way that’s empowering, not overwhelming. There’s no sugar-coating it: there’s a lot that goes into financially preparing for the arrival of a child. But all these years of diligent effort have already paid off in a huge way by affording me a lot more peace of mind than I might otherwise have right now. My approach to pregnancy has been one focused on staying present, staying calm, and doing my best to stay healthy, both physically and mentally.

I know Brad and I are not the first to navigate this journey, and so I welcome any and all advice you have for us during this time.

Got a career conundrum you want Emilie to cover on the podcast? Call and leave us a voicemail NOW at 910-668-BOSS(2677).

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