Five Things You Must Do Before Having Kids

By Sallie Krawcheck

I’ve been a mom and a step-mom for more than two decades now — the running joke around my house is that I’m a totally mediocre one. Being a mom is one of the best experiences I’ve ever had; it’s also one of the hardest. And it’s expensive, something that we don’t often think about.

Let’s just say it’s a good thing that we love our kids, because the USDA estimates that it costs the average two-parent, middle-income family more than $245,000 to raise a child from birth to age 18. And that doesn't even include the big costs of pregnancy or adoption, college, or any help you may want to give them after they’ve graduated college, but haven’t quite launched yet. (Such a phase could be longer than you think — just saying.)

It also doesn’t include any cost in our careers, such as a career break.

So how do you prepare for one of the most rewarding, but financially challenging times of your life?

For starters, it helps to think early on about how you'll need to adjust your finances in order to fit a kid (or kids!) into the picture. And develop a plan for affording your own “Full House.” And if you're already expecting, you most likely have a million-and-one things on your to-do list before the big day arrives. But believe me — adding these five checkboxes will be well worth it.

1. Save Up

First, we recommend building up an emergency fund —three to six months' worth of take-home pay saved in its own safe, easy-to-access bank account.  You may want to boost those liquid savings to cover some of the shorter-term expenses if you’re planning to have a baby in the near future — think diapers, new clothes for an ever-expanding infant, more playsets than you’d ever think you’d need, and maybe more than your baby shower covers. You’ll want to make sure you can cover all of baby’s needs, as well as your own, if you suddenly lose a job or take some other unexpected financial hit.

Think about longer-term costs, too. Remember that $245,000 price tag for raising a kid to the age of 18? Chances are, you might not have that kind of dough just lying around. That’s where an Ellevest Executive “Kids Are Awesome” goal can come in.

Ellevest recommends about 9 months of take-home pay saved up for extras like summer camp, trips to grandma’s or even a future wedding. While it won’t cover everything, it’s a great place to start, and a way to feel financially prepared for anything unexpected that may come up — cute babies have a tendency to become adolescents with expensive hobbies.

2. Invest in Any Career Breaks

Consider whether you'll want to take a break from work to stay home with your kids. First stop: check your company policy on parental leave. If your company offers one, that’s great (but, sadly, you’re in the minority, since most companies in the U.S. still do not).

Second stop: think about the cost of a longer career break. This cost is something that we can underestimate…by a lot. Let’s look at some example numbers:

Say you’re earning $85,000 a year and want to take a two-year career break. How much will that cost you? Most of us will answer $170,000. The real answer? Over the course of your career, it can cost you 10 times that: $1.7 million. WTF???*

The number is so high because a two-year career break can result in a 20% paycut. (Absolutely infuriating, but that’s what the numbers show.) And so future pay increases are off of lower earnings levels from there; and not to mention that you don’t invest in your 401(k) or contribute to Social Security while you’re out of the workforce as well.

Ok, ugh.

One way you might be able to partially "pay for" the career break could be to invest. Historically, investing has been much more powerful than leaving your savings in the bank.

And when you’re ready to get back to work, check out resources like Apres, iRelaunch, and Ellevate Network, which offer guidance and networking opportunities for women who are re-entering the workforce.

3. Think About The “What-If’s”

Yep, I’m gonna get morbid on you here. Wills and life insurance policies aren’t typically the first thing that come to mind when you’re in that euphoric stage of oohing and aahing over your bundle of joy. But trust me, taking care of the “what-if’s” upfront can eliminate sleepless nights later on down the road.

Writing a simple will ensures that if the worst happens, your wishes are known in the eyes of the law. That means everything from what happens with your assets, to who’s responsible for taking care of your kids. They’re pretty straightforward to set up, and can cost anywhere from $300 to $1,000 at a local law office. If you already have one and your family is growing, now’s a great time to update it.

Life insurance is another important consideration. While some sources will tell you a good rule of thumb is having enough to pay off your mortgage, we suggest thinking more broadly than that. Consider your earning power, and the amount of financial support your partner and kids will forfeit without you in the picture. Do you want to leave enough to cover the cost of college? Additional childcare costs while your partner is a single parent? Have an open discussion and get a policy now, before you blink and your drooling toddler is in middle school. The whole thing is a blur, so take care of the tough stuff early.

4. Do A College Savings Reality Check

It’s no secret today’s generation of college grads is saddled with record levels of student loan debt. Not exactly a dream scenario for your future 22-year-old’s adulthood debut. And as much as we’d all like to think our tiny humans will grow up to be prodigies of some sort — in academics, sports, or the arts — let’s be real, it would be chancing it to count on a scholarship.

The cost of tuition and fees at private and public colleges has gone up 11% and 13%, respectively, in the past five years and that trend shows no sign of slowing. The bottom line is college is expensive. So what’s a savvy parent to do? Investing early and investing in the right accounts are likely your best bets. A 529 plan is a great starting point. Some state-sponsored plans may help you save big time on taxes. Plus, if you start saving for the cost of college when your child is born, you could have 18 years of compounding returns. Trust me, you’ll thank yourself at graduation.

5. Prioritize “Me” Time

Yes, parenthood is joyous — but it’s also taxing in every way imaginable. My final piece of advice is make sure you’re financially able to treat yourself, whatever that means for you. There’s nothing wrong with admitting that some time away from the kids or a trip to the day spa may help you be a more engaged parent when you return.


We project Elle’s salary with and without a career break, using a women-specific salary curve from Morningstar Investment Management LLC, a registered investment adviser and subsidiary of Morningstar, Inc., which includes the impact of inflation. For the career break, we assume that Elle takes a 2 year career break in 5 years, and returns to a job paying 20% less than her salary at the time she takes the break. We assume no salary increase of any kind, including inflation, during the break. We add up her annual salary amounts under both scenarios over a 40 year period. $1.7M is the difference between the two sums.

The results presented are hypothetical, and do not reflect actual investment results, the performance of any Ellevest product, or any account of any Ellevest client, which may vary materially from the results portrayed for various reasons. The results presented are not for any specific product and do not take into account specific product fees. Financial forecasts, rates of return, risk, inflation, and other assumptions have been used as the basis for the results presented.

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Sallie Krawcheck

Sallie Krawcheck is the Founder & CEO of Ellevest.