Financially Planning for Parenthood

Given that I’m going to be an older mother — turning 31 next month and not married yet let alone pregnant — I’ve done a bit of spreadsheeting around how I can afford to have a child. This puts me a little more at ease given that I can live frugally while earning a reasonably high income, save a lot, and put myself in a much better position to have children.

In my chart I noted how much I plan to save each month and have a column for lower average annual interest rates (5%) and higher ones (10%) from age 31 to 40. The chart otherwise includes the following expectations:

1) I will save $5000 per month between now and the time I have my first child (3/1/2017, give or take)

2) I will take 3 months of unpaid leave after having my first child and save $0 per month over those 3 months.

3) I will return to work full time and continue saving $5000 per month (buying less stuff for myself to offset stuff for baby) until baby #2

4) baby #2 will be born 1/1/2020. At this time I have reduced my monthly savings to $0 per month. I may want to work at this time but I want to plan to allow myself to not work and have enough money in our family to afford this. I want to be able to then afford to live off of my husband’s salary while my savings can grow for our retirement nest egg. We’ll probably have to move to a cheaper state at this point.

Based on these 4 constants and the compound interest variable, the range of my networth at age 40 would be $856,634 to 1,271,596 (*not counting my partner’s savings.) And baby #1 will just be turning age 7 or so, which is when babies become kids and start to get expensive… just in time for me to go back to work.

So this all seems rather do-able as long as I keep my head down and focus on the 58 months of saving $5k a month — so 4.8 years, give or take, or $280,000 of savings over that time period (which is a lot… but seems at least somewhat possible.) Given my potential annual bonus is anywhere from $0k to $40k after tax, I could actually get to that amount much quicker if I do my job well. Let’s just say I obtain a quarter of my annual bonus for those four years — $30k per year — that actually gets me to the $24.1k $280k goal much quicker.

That said – I’m not accounting for IVF costs which will likely be needed and will likely be very expensive (I should account for $100k for two kids and it might not even work…)

Thus in order for me to comfortably have children, I must focus on my job — really over the next two years — and attempt to obtain at least 50% of my annual bonus.

Inputting my networth growth with 50% bonus (~20k extra per year) by the time I have baby #1 (3/1/2017) I will have reached my goal of $500k network — with $507k networth with the 5% interest and $560k with 10%. Clearly I have my work cut out for me. But I can do this so the rest of my life can provide what I really want — not “no work” — but choice and flexibility.

Here is my goals which I’ve adjusted for January 2016 target dates. I will focus on tracking to these numbers hitting the maximum possible bonus possible to achieve my desired results.

Screen Shot 2014-10-20 at 2.32.19 AM

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  1. Congrats on having such a detailed plan, saving 5K a month seems ambitious, as it will be dependent on future income. Planning kids out like that can be good and bad, but don’t get down if it doesn’t go as planned. Just enjoy the ride even if you do it sooner or later. I know many people who had kids and didn’t have 100K in the bank. Money does help you, but love has a greater power.

  2. James says:

    It’s good you like to plan things out, but you don’t have to be very rich to have kids if you or you significant other plan to continue working. Of course if you plan to send your kids to private schools and pay for their college(private), then it’s an entirely different matter.

  3. I love your calculations. My “buy a house” clock has been ticking for the past 8 years while my “have baby” clock is strangely silent… so I have a similar calc in my head on when I can buy a home!

    Best of luck on your goals.

  4. Taylor Lee says:

    Good on you for getting everything together! Your ambitions are high but I’m sure your strength and capabilities are even higher.

    I’ve been going through similar calculations lately since I am the breadwinning not-yet-spouse of the relationship, which is likely not to change as I have a much higher earning potential than my partner and we both agree he’d make a great SAHD.

    My goal is to have a paid off 2-bed condo near the city (~400K) paid off by the time child #1 hits and to have a 3-bed paid off (~$650K) by the time child #1 starts school. If I can get that plus a tiny college fund and a couple years of expenses by the time I’m 35 I’ll be the happiest camper.

  5. Joy ( User Karma: 0 ) says:

    I will post the spreadsheet in my next post soon.

    I will not delay having kids if I don’t hit my goals. If I have $0 in the bank maybe I will give up on the idea of having kids but I’m not holding myself to the $500k goal. I juts want a reasonable way to achieve this goal if the markets cooperate.

    I’m focusing on an average of 5% to 10% annual year offer year interest, so that still leaves room for one bad year. If the markets really suck I’ll have to adjust and deal with it. It also inspires me to save even more (if I get more bonus) because that helps balance out any potential risk from losses (or to hold some in cash and invest on the dips.)

    $5k per month is inclusive of 401k. I always max out 401k first (my strategy is generally to hold enough in cash last three months of the year so I can put all of my income into 401k immediately upon start of the new year, unless markets are clearly over inflated, then I spread out my investments a bit more. I like to be fully invested in my 401k for the year by March/April.

    The $24.1k goal was a typo/error, I need to fix that. It’s a $280k savings goal not $24.1k.

    I completely realize that these numbers may not be met (esp in terms of when I will actually have kids) but if I don’t have clear goals I’ll never be able to reach anywhere near them!

  6. Henrietta Schermeier says:

    No offense, but planning specific dates for having kids seems a little ridiculous. Especially when you know that it will be difficult for you to conceive. Can you post the spreadsheet? It’s difficult to follow: like where did the $24.1k goal come from? Is the $5k per month inclusive of your 401k? Are you investing all of this money? What’s your plan if the market has a significant downturn again? Will you delay having kids further since instead of $500k you may have $300k?

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