Buffs and Debuffs From Having A Child: Ian covers the financial planner’s take on clients adding a kid. What sort of buffs and debuffs does he notice when parents have their first child? How do you assess if it’s the right move for you?
Worksheet:
TRANSCRIPT:
What’s up Internet? Welcome to Nerd Finance. I’m Ian Bloom, your resident financial life planner and huge nerd. In today’s episode, we are going to be kind of continuing from last week because last week we talked about growing your adventuring party by adding a certified public accountant or a CPA to your party. Well, CPA’s are useful, but what if you want a new player entirely to join the party, a child? What do financial planners think about that and what are the financial side trade-offs?
Well, to start off with, let’s start with the high notes because it’s always good to start on a high note. Children bring a lot of meaning and joy into people’s lives. Just ask a recent parent, they are overjoyed and elated, although they are often tired as well. So having a child can bring a meaningfulness buff to your life. It will give you some more motivation and make you want to spend more time with the child. It also gives you a tax credit, which is a small financial incentive that the government puts out of about $2,000 a year that you will get back on your taxes.
Now the debuffs that a child provides to the party start with the upkeep. Frankly, early on diapers and food costs a little bit extra, but as the child grows up there will be other expenses that you will have to cover for them like school trips and daycare and other things like that. So just make sure that you are prepared for those additional upkeep expenses. Make sure that there is room in the budget so that you can handle this debuff without it knocking the party on its back.
The other debuff that it applies to the household from a financial perspective is having a child means that they’re going to be some aspirational expenses that you would likely like to provide for the child. These are things like education, so college, or on the other side of the fence, maybe a life start fund regardless of whether the child wants to go to college. So things like a home down payment, buying the first car or an amount of money to start a business with, if that’s what the child desires.
So these aren’t necessarily debuffs from the perspective that they provide less meaning or take away the motivation of the party, but they are debuffs in the sense that they place additional financial strain and additional tax so to speak on the party’s resources. So just make sure that when you’re having a child you are prepared for this additional upkeep and aspirational expenses.
In summary, having a child can be a very meaningful thing and is often a goal of many parties. Bringing new players into the game means that the game continues to be played and it also provides a level of fulfillment to the original party members. Anytime you raise a new player and get them past level five it feels really good because then you get to start seeing them act like a full-on player. But in addition to that, there is a small tax credit that you get as a benefit for having a child.
Finally on the debuff side we have added upkeep, which is an additional expense, and we have aspirational expenses like providing for college and helping the child start their life. But all that being said, I haven’t provided specific numbers for those things so I will include a worksheet in the description below that kind of uses some of the numbers that I’ve worked with clients.
I hope that this video was both helpful and maybe a little funny to you to hear me describe children as new players. If you did like the video, like, comment, subscribe, and also head over to my website, openworldfp.com to check out my firm and some of the services that we offer. Thanks so much. Have a wonderful day.
