A couple of months ago, one of my girlfriends called wanting to have a chat about money (a favorite pastime of mine). She and her boyfriend had been living together for years and were expecting their first child. They were, of course, extremely excited to welcome the new family addition, but they weren’t exactly sure how to split the major costs that were coming their way. Though they had lived together for years, they hadn’t combined any of their money and it was a system that worked perfectly for them. How would a baby change that?
I didn’t have an answer for her, but I knew it wouldn’t be difficult for me to find some women who had navigated the situation well. The trend of married or cohabitating couples keeping separate bank accounts is on the rise.
To get some tips, I sent out a note to subscribers of my weekly money newsletter and was inundated with thoughtful responses. It turns out that the principles of how to best handle money in this situation aren’t actually too different from a couple that combines their accounts, but the situation may require a bit more organization and discussion.
Here are some of the best tips I received for navigating separate finances when you have a baby:
1. Create a Monthly Budget for Baby
The best first step with all big life changes is to create an estimate of what your new expenses will be. You’ll want to include the standard things that come to mind when creating a budget — like childcare, clothes, and toys — but you’ll also want to pay close attention to other expenses that you’ll likely incur. Think about any pre-baby expenses, such as medical bills and less obvious post-baby expenses, like wellness classes or mommy-and-me classes. Those costs can add up, and you may not want the burden of those expenses to fall solely on the mom. Planning for them ahead of time can help you determine how best to split costs.
2. Decide How to Split Costs
If you’ve been living with your significant other, you likely have already figured out how to split living costs. A baby can throw a wrench into plans that are already working. If you’re currently splitting costs equally, have a discussion about how incomes and work schedules may change. If the mom is planning to take maternity leave that’s unpaid, splitting costs equally may no longer make sense. If one person is planning to reduce their hours (and pay) at work, their contribution to monthly expenses may need to change as well.
Figure out the right scenario that works for you, your partner, and your baby and make adjustments to your plan to ensure you both feel that it’s fair.
3. Consider A Joint Baby Account
Even if you don’t have any joint accounts for your living expenses, a joint baby account can make life a lot easier. Once you’ve determined what your monthly budget for baby will be and how you’re going to split costs, consider setting up a checking account that you both have access to in order to pay for monthly expenses.
If this is the first joint account that you’ve had, you may want to decide on some spending parameters. Some couples that I spoke with set limits on individual spending. For example, if one person was going to make a purchase that was over their decided $150 spending limit, they would talk to the other person before buying. The spending limit helped them feel like they had autonomy without leaving the other person out of big decisions.
4. Plan for Long-Term Goals
Monthly baby expenses can be costly, but they’re generally only part of the equation. Planning together for long-term goals is key to making sure you don’t feel overwhelmed when facing the big future costs.
After creating your budget for monthly baby expenses, take some time to each reflect on what long-term savings goals you have for your child. It could be saving for private school, camp, college, or any other expenses that are larger and will require more planning and agreement. If there is a future expenditure that one person is really adamant about, talk about if and how you’ll split that cost.
5. Automation is Key
Meaningful uninterrupted conversations with your significant other are difficult enough when you have kids. Don’t waste time having to remind each other about monthly contributions to your joint baby account. Once you decide on a monthly contribution amount for your joint baby expenses and any long-term goals, immediately set up automatic transfers.
6. Write it Down
After a few (sleep deprived) months, memories have a way of fading. Why did you decide to send your baby to the expensive nursery across town? And how did you decide what you were each going to contribute to college savings and monthly expenses?
When you make your plan for your baby or you make changes to that plan, be sure to write down exactly what you decided on and why. Even with the best communication skills and the sharpest memory, small details will be forgotten and missed. If you have a reminder of how and why you made your decisions, you’ll avoid having multiple conversations about the same expenses.