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Why your adoption plan should have help from a financial advisor

Father putting baby son to sleep on his arms at home
FG Trade/Getty Images/iStockphoto

Adopting a child is a rewarding experience, but it does change the financial landscape for many prospective parents. A number of upfront expenses come with adopting a child on top of the ongoing costs of raising them—think daily expenses like food, shelter and child care. Additionally, adoptive families may need to factor in health care expenses including counseling and therapy services.

It's worthwhile to break down what your finances might look like in the first few years of being a new adoptive parent. Creating an adoption plan can help you ease some of the financial stress so that you can worry less about money and focus more on your new addition.

Understanding the different adoption options

First, it's important to decide which adoption option is right for you. There are three main types of adoption: international adoption, domestic adoption and adoption from the foster care system. All three options are associated with different costs.

International adoptions tend to be the most expensive due to travel fees and other considerations. Domestic adoptions through an agency vary in cost. Adopting from the foster care system is usually the least expensive option, and many adoptive parents qualify for government subsidies available to help offset the costs.

According to the Child Welfare Information Gateway from the U.S. Department of Health and Human Services, adoption costs vary depending on factors such as the type of adoption and where you live—but they can add up to tens of thousands of dollars.

Is there financial help for adoption?

Yes, there are several ways to supplement adoption costs including using employer benefits, grants and tax credits, fund-raising and loans. Once you decide which type of adoption is right for your family, you can explore each of these financial options:

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Employer benefits

Many employers offer benefits that can help offset the high costs of adoption, such as reimbursement for some adoption expenses, paid leave for adoptive parents, and financial counseling services. Check with your human resources department to see what benefits are available.

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Grants and tax credits

Another potential source of financial help for adoption is via grants. A number of organizations offer grants to families who are adopting. Parents can use these funds to cover the costs of the adoption and other related expenses. And they may not need to be repaid.

The Child Welfare Information Gateway maintains a list of places that offer grants and loans for adoption.

If you are looking for adoption financial assistance, you may also be eligible for tax credits. The federal government offers a tax credit of up to $14,890 for qualifying adoptive families.

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Another way to raise money for your adoption is through fund-raising. Several online platforms allow you to accept donations toward your adoption goals from family and friends. Many churches and community organizations also support families who are adopting.

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If you need to borrow money to help pay for your adoption, there are a number of loans available. Adoption loans are typically low-interest and can help cover the costs of an adoption.

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How to budget for life after adopting a child

Yes, the cost of adoption is high, but it's also important to plan for what comes next. Start by creating a household budget that incorporates all your needs and wants as a new family unit. This seven-point checklist for new parents can help you get started.

First, make a list of all anticipated annual costs. Include both one-time events like birthday parties and recurring expenses like groceries. Then, research average costs for budget categories like health care and child care in your area. Sit down with your partner to figure out what you can realistically afford to spend each month as you raise your child.

Talk about what's important to you as a family. Do you want to take a vacation twice a year? Do you want to purchase a larger home to better suit your family's size? Use these goals to guide your conversations with your partner about what to include in your budget and what to save for. Use this personal cash flow worksheet to get started.

Once you know the approximate cost of raising a child in your family, you can adjust your current spending habits as needed.

The benefits of creating an adoption plan

Ultimately, an adoption plan is like an action plan. Creating one helps you to gain financial confidence not only when welcoming a new child into your family but in the coming years as you watch your child grow. When you build an adoption plan, you are creating a road map for your child's future. This includes deciding how you will support them financially and raise them in a secure home.

Creating this document means you've thought through many of the potential scenarios that could arise as you bring a new child into your family. Your plan should include:

  • The total cost of your adoption
  • Your plan for building (or growing) your emergency savings account
  • Your budget for the first year after adoption
  • Any changes you need to make to your will or estate plan with your attorney
  • Your life and health insurance coverage needs. Prepare for your growing family's continued well-being in case you experience a chronic illness or injury, or if you're no longer there to provide for them. Review your insurance options and work with a financial advisor to get a protection plan in place, or potentially adjust your current plan if your needs have changed.

This adoption plan is a fluid document. As your family grows and changes, your plan should, too. Review and update it annually to ensure that you're as prepared as possible for whatever life may throw your way.

Final thoughts on adoption plans

Adopting a child is a life-changing decision that comes with many joys, and many considerations. Remember that you don't need to do it alone—you can get help creating a financial strategy with a financial advisor, who will help you understand your current financial picture and plan for the future. This may include creating or updating a budget, understanding your credit score, knowing what kind of life insurance you currently have (if any) and reviewing impacts to your long-term goals, such as retirement. With a little planning and preparation, you can make your adoption a reality and focus on what matters most.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.