Having and raising a child is a major financial commitment. However, unlike other significant financial expenses like a home or an automobile, you do not have to fill out an application, qualify and be approved for it. No one checks your credit history or debt-to-income ratio. It is easier to become a parent than acquire a driver’s license. However, it isn’t as easy to be a parent. If I were to pen down all the responsibilities and costs associated with raising a child, the list would never end. It is no joke.
Trying to cope with all the new expenses and old ones, including past debt, is a serious, serious endeavor. And, the new expenses, they are only going to increase with time, as a child grows up. This means pressure and stress for new parents, lots of it. Hence, I think it is prudent to ask yourself and your partner if you want to encumber a soon-to-be-born child with debt from the past that is not mortgage- or education-related. And, if you should eliminate all your personal and credit card debt prior to having a baby.
The candid answer – maybe.
Why? Everyone’s situation, priorities and tolerances are different. There are no simple, straightforward, one-size-fits-all answers. Some soon to be parents may want to clear all their financial liabilities and the stress that accompanies them prior to welcoming a new member into the family. Others may not view it as a priority. Or, perhaps, they are not positioned to do so. Or, maybe they may believe they have a handle on their debt and are financially confident they can responsibly manage the additional costs of raising a new child.
Debt can be a complex and emotion filled subject.
One reason, the debtor needs to manage more than the financial terms of borrowing. He or she also needs to manage and cope with the emotional ones. The emotional price of borrowing includes the constant mental pressure of knowing you owe another person or enterprise a part of your future. That burden might be further complicated and compounded when one considers that they might face shame and legal consequences if they are unable to pay back their obligation.
Obviously, debts are liabilities. They are also a menace that limit finances. They are something any person and family unit would be well advised to rid themselves of as soon as possible. The reasons are so straight forward and sensible that one should not need to invest any of their limited time and energy even asking why they should pay off their debt immediately.
Debts threaten the entire family’s future. They place boundaries on their finances. They restrict the money they can use, regardless the purpose. And that would include celebrating birthdays, buying presents, purchasing a home, as well as other things families generally place a value on.
Furthermore, debts demand special attention. They must be serviced in accordance with very specific terms. And, if one falls behind, they can be turned over to a collection agency. Debts not paid on time or unpaid debit will result in a lower credit score and the inability to qualify for affordable loans. In other words, debt can be a significant hindrance to happiness.
If you were to ask me, whether it is a good idea to bring kids into the world and a family unit that had existing debt, I would again have to say maybe. There are lots of variables. I would minimally advise, couples make every effort to eliminate their unsecured debts prior to having a baby. This would give them more opportunity and cushion to create an environment for their forthcoming child.
But in the end, the decision is one each couple will need to wrestle with and decide upon for themselves. The thing is this, they would be better talking about it before they have the baby, then after.