How Children Can Impact Your Financial Planning

Dec 17, 2019

We recently shared a blog post with tips on setting your financial priorities in which we mentioned that each individual’s priorities will be different depending on the makeup of their lives and the goals that they’re working towards. Another facet that may impact your financial goals and indeed, your overall financial plan, is the other people that inhabit your life. Today we’ll walk through how having children (through birth or adoption) can impact your day to day financial life and your long-term planning.


We all know that raising a child can be expensive but the truth is that the costs can also be unexpected. Beginning to save for children as soon as possible may be prudent if you’re considering children. Adoption brings a unique set of fees as well (agency fees, legal fees, etc.) and you may need to put more funds out up front when considering adoption. In addition to increasing your savings in preparation for the arrival of your new baby, you may want to consider increasing your emergency fund to protect your new addition.

Insurance & Healthcare

As soon as you get pregnant, or bring your new baby home, you will need to consider insurance and healthcare needs for your child. Discuss these changes with your employer if you have insurance through your employer or begin your research if not. Make sure to ask questions and find the coverage that makes you feel comfortable!

Childcare & Education Costs

Childcare and educational costs are a big question when it comes to children. Discuss with your partner and your financial planner how you plan to approach both immediate child care needs and planning for long-term education costs. Your financial planner may be able to help you choose an educational savings plan like a 529 college savings plan, an ESA, or other accounts with no or low fees that can help you make the most of your plan.

Life Insurance and Estate Planning

Adding a child to your family can also mean a different eye toward the future. Many new parents will add or extend their life insurance coverage to make sure their children are covered in case of emergency. In addition, all beneficiary forms should be updated (think of any insurance policies, annuities, retirement accounts, etc.). If you have a will, this too should be updated to reflect your growing family and if you don’t yet have a will, you may want to consider creating one with a professional.

Tax Changes

Adding another dependent to your life will definitely impact your taxes. You will now be able to claim an additional person on your taxes and may be able to claim a portion of your childcare expenses or additional credits like the adoption credit. You will also likely need to update your withholding as it relates to your paycheck. Be sure to discuss this with your financial planner and your accountant!

As with any life change, having children can be exciting, rewarding, and a little bit scary! Preparing for this change by making updates to your financial plan is one way to make sure you’re prepared for what life will throw your way. We recommend reviewing your plan regularly with your financial planner to keep it on track and stay ahead of any new changes that may come. You can’t avoid change but you can do your best to keep up with it!

Peninsula Wealth is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Peninsula Wealth and its representatives are properly licensed or exempt from licensure. This material is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Peninsula Wealth unless a client service agreement is in place. It is expressly understood that our firm will not provide accounting or legal advice nor prepare any accounting or legal documents for the implementation of your financial planning objectives.