Financial Planning for the Family: Expanding the Nest

Bringing a new family member into your home—whether it’s a baby, an adopted child, or even a parent moving in—is one of life’s most rewarding journeys. But, let’s face it, growing your family also brings a hefty dose of financial reality. From diapers to college savings, and everything in between, financial planning for the family requires further consideration.

Guest blogger, Nichole Coyle, CFP® CSLP®, returns to explore how growing your family might impact your finances and what changes to consider in your financial plan:

Financial Planning for the Family: the (Not-So-Little) Initial Costs

Welcoming a baby, for example, can come with upfront expenses like hospital bills, car seats, cribs, and that stroller with more features than your first car. Adoption can bring its own significant financial outlay, with legal and agency fees often totaling tens of thousands of dollars. These costs can take a big bite out of your budget, so planning ahead is key.

Consider starting a “family expansion fund” as soon as you know you’re planning to grow. Even a small monthly contribution can help manage future expenses.

Everyday Expenses—They Multiply Faster Than You Think

Diapers, formula, school supplies, extracurricular activities—the list of expenses can feel endless. As your family grows, so do your monthly bills.

Additionally, expenses that often increase for an extended period include:

• Childcare Costs: In many areas, childcare can rival or exceed mortgage payments.
• Groceries: Feeding kids can feel like you are running an all-you-can-eat buffet that never turns a profit.
• Healthcare: While premiums may or may not rise with additional children, out-of-pocket expenses will likely increase with each additional family member.

Because expenses will continuously change, it’s important to revisit your monthly budget. Track your recent spending, plan for upcoming expenses, and identify areas where you can adjust if needed.

Housing and Transportation

A growing family often outgrows its home and vehicle. You might find yourself shopping for a house with an extra bedroom or trading in your sedan for a minivan.

Things to consider:

• More Space, More Money: Factor in the costs of higher mortgage payments, property taxes, and maintenance.
• Love It or List It?: Evaluate if it makes more financial sense to renovate your existing home or move into a new home.
• Are We There Yet?: Don’t forget to include the true cost of a new car—insurance, loan rates, fuel, and upkeep.

Education: Planning for Their Future

While not everyone chooses to partially or fully fund their children’s education, if it’s something you want to plan for, it’s worth having a discussion with your financial planner early. If you thought the diaper phase was expensive, wait until you’re staring down tuition bills. Whether it’s private school, extracurricular activities, or college savings, education can challenge even the best financial plan.

Talk to your financial planner about starting a 529 plan or similar college savings account, the sooner, the better. Small contributions over time can lead to significant growth.

Financial Planning for the Family’s Emergencies

With more dependents comes a greater need for financial security. Life insurance, disability insurance, and a robust emergency fund become essential to help protect your growing family.

Consider this checklist:

• Increase your emergency fund to cover 3-6 months of expenses for your expanding household. Planners often recommend an initial goal of 3 months of expenses and a max goal of 6 months of income in a liquid account (think savings, money market, etc). The goal amount will vary based on your specific circumstances.
• Review and update your life insurance policy to ensure it reflects your family’s needs.
• Financial planning for the family should include a review of your will and estate plan. Update as needed.

Retirement Savings: Don’t Put Yourself Last

While it’s tempting to prioritize your children’s needs, don’t neglect your own future. Your retirement savings shouldn’t be completely forsaken to their piano lessons or new soccer cleats. Work with your financial planner to help you find a balance that works for your family. Keep in mind, you can borrow for college, but you can’t borrow for retirement. It’s important to keep contributing to your 401(k) or IRA, even as your expenses grow.

Financial Planning for the Family: Tax Implications

Growing your family can mean changes to your tax situation. Child tax credits, dependent care accounts, and adoption credits can all impact your tax bill in a positive way. Make sure to consult with a tax professional to ensure you’re taking advantage of every benefit available.

Forming Your Financial Planning for the Family Plan

Growing your family is an incredible adventure, but it can also be a financial game-changer. With proper planning, you can navigate the challenges and enjoy the journey. Think of your financial plan as the foundation of your home: sturdy, flexible, and ready to support the joy (and chaos) of family life.

When in doubt, consult a financial planner to help you adjust your strategy and make your growing nest a place where everyone thrives. Your financial journey is as unique as your family—let’s grow together.

Nichole Coyle, CFP®, CSLP®

Managing Partner, Financial Planner

2300 St. Clair Ave NE

Cleveland, OH 44114

216.621.4644 x1607 office

330.607.2213 cell

nichole@impactcfp.com

Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a Broker-Dealer, and a Registered Investment Advisor.

Cetera is not affiliated with the financial institution where investment services are offered or any other named entity.

Investments are: Not FDIC/NCUSIF insured * May lose value * Not financial institution guaranteed * Not a deposit * Not insured by a federal government agency.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

Cetera Advisor Networks LLC exclusively provides investment products and services through its representatives, Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business.

This information is not intended as tax or legal advice.

This material is for information purposes only and  should not be considered specific advice or recommendations for any individual.

Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney.

Posted In: Guest Blog