Motherhood can be one of the most exciting and rewarding journeys of a woman’s life. Yet, understandably, the anticipated arrival of a new baby can also be stressful, particularly when it comes to proper financial planning to ensure the child’s long-term well-being. In honor of Mother’s Day, we sat down with Rachel Barzilay, CAP®, CFP®, CRPC®, Managing Director, Wealth Management Advisor and Senior Portfolio Manager with Merrill Lynch Wealth Management in Boca Raton. In addition to her role as a financial advisor, Rachel is a new mom herself.
What should new parents know when it comes to budgeting for children?
Most new parents realize that raising a child is expensive — the latest government figures put the cost at $233,610 for the first 18 years alone, which doesn’t include college tuition or taking inflation into account. Budgeting is key to managing this major life change, which I can attest to as a new mom.
If you’re looking to adopt a child, you also need to factor in the upfront costs associated with legal fees and counseling if you go through a private agency. If you adopt from another country, you’ll need to consider the travel-related costs such as airfare, lodging and meals in addition to acquiring a passport and undergoing a medical exam.
How do I decide between day care or being a stay-at-home mom?
Depending on where you live, day care costs today nearly rival college tuition. On the other hand, it may make more sense for you (or your partner) to stay home and raise your family. This is a very personal decision that requires thoughtful conversation and running through different budget scenarios with your partner.
If you decide to place your child in day care, check to see if your or your partner’s employer offers a dependent-care flexible savings arrangement (FSA) and – if so – take advantage of it. If you are considering staying at home to care for the family, be sure to conduct a thorough review of household expenses such as the mortgage and utility bills to ensure they can still be covered by one income.
As a mother, how did you decide whether or not to continue working?
For me personally, I knew I always wanted to stay in the workforce. I love what I do and receive a lot of satisfaction from my job, so it was important to keep this part of my life. My husband and I also wanted to send our children to daycare so they could benefit from both the social interaction and the curriculum. It’s also important to me that I set a positive example for my daughter (and future children) that women can be successful both in the workforce as professionals and in the home as loving mothers.
How soon should I start saving for my child’s future education?
It’s never too soon to start saving – especially as tuition climbs higher almost every year – on top of costs for various fees, books and housing. Consider setting up a 529 college savings plan, a Florida Prepaid plan, or a combination of the two for each child. Then, arrange monthly, automated contributions that will go toward covering four years of tuition and fees by the time each child leaves home for the college campus. You might also consider asking family members, such as your child’s grandparents, to contribute to the 529 savings plan in lieu of gifts on special occasions.