Starting a family: Here’s what you need to consider financially

Published on: November 6, 2019

Written by:

Adam Faulkner

Starting a family is an exciting time in your life. It also means you face huge changes across so many areas, including your finances.

Here’s a piece of reality for you: Starting a family, and having kids in general, is expensive. While that might not be news to you, there are a number of factors around your finances that you may not have fully considered. 

Here are my thoughts on what you need to consider before you start a family: 

1. Get your thoughts clear on employment

Number one rule: Work out with your partner what you’re going to do around work. You need to understand upfront what role each of you is going to take. 

There’s obviously going to be some changes. If you’re both in careers where you’re ambitious and driven, who is going to make the sacrifice and what is the knock on effect of that? There’s the obvious hit, at least in the short term, to your overall earning capacity while either parent takes time off work, but there could also be a hidden cost on your career.

For example, will it be easy for you to take a career break and then return at the same level that you were at before? Will you even want to do that? Is a part-time return to work more realistic? These are the questions you need to consider upfront and have a plan for dealing with them. 

2. The lifestyle impact – Be ready for it! 

We live in age where our lifestyle options have never been better. And for a lot of couples, those early years together are fantastic. Travel, eating out, focusing on hobbies and interests, these are all a big part of life.

Starting a family will have an impact. You will need to shift your priorities and that means making compromises on where you spend your disposable income, especially when there’s an impact from either you or your partner taking time out of full-time work. 

There’s also going to be changes to areas such as where you live; for example, is the house you’re in today set up for a family? Will you need to move to another area that has better access to services like childcare and schools? All of this has an impact financially and you need to consider what you want in both the short and longer term. 

Education is worth thinking about at this point too. The costs around educating your kids, particularly if you want to take the private school option, can be confronting. Taking an early approach to this and factoring it into your plans can save you financial pain later on.  

3. Return to work – cost vs. reward 

It’s worth including in your plan the costs you’ll face in returning to work. The big one here is childcare: Australia, particularly in a city like Sydney, has some of the highest childcare costs in the world

It’s not uncommon, in situations that I see as an adviser, where one parent’s wage in returning to work is completely allocated to the cost of childcare. So you reach a situation where there’s no net financial benefit. That may not be the focus; for many the act of returning to work is more about a sense of regaining yourself and a focus on something other than just the kids, but it’s worth considering upfront and being realistic about the costs involved. Not everyone is going to have family on hand to step in and help. 

There’s also the challenge (in some cases) of people blindly expecting their families to help and then being caught short when it doesn’t work out the way they expected. It’s important to discuss your childcare needs with your family members to make sure they are willing and happy to provide the support you are after. Remember you’re most likely eating into their retirement, something they want to enjoy as well!

The situation is different for everyone and it’s important that you build a plan to suit your specific circumstances. Want to discuss your financial plan and how it impacts your goal of starting a family? Click here to talk to us about your financial future. 

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