Planning to Foster a Child for the First Time? Here's What You Need to Know About Managing Finances

Planning home visits and getting licensed is a necessary but time-consuming process, and soon-to-be foster parents need to be prepared—physically, emotionally, and financially. 

For first-time foster parents, the experience of fostering can be exciting but nerve-wracking. Planning home visits and getting licensed is a necessary but time-consuming process, and soon-to-be parents need to be prepared—physically, emotionally, and financially.

Each state pays foster parents a certain amount for a child, but that is often only enough to cover the very basic needs. The amount itself varies based on the state, the child's age, and their needs. However, if you're thinking that fostering may be a lucrative way to make money, that couldn't be further from the truth. In fact, new foster parents are required to provide proof that they can support a child without accounting for the state payments. And most foster parents report spending much more than the state allowance on the children.

For first-time foster parents, financial planning is key to ensuring their foster children are safe and happy. Ahead, seasoned foster parents share their tips and suggestions that worked for them.

Budget, budget, and budget again.

Making a budget and sticking to it will be essential. To get a good estimate of your earnings and estimates, create a meticulous list of all income sources, along with all fixed and varying expenses per month. Based on the amount left over, you will know whether that is enough to support another child. If not, you will have to make some lifestyle adjustments.

Every item you previously considered a "need" may have to be reconsidered according to your new budget. For example, you may want to go from having Netflix, Amazon Prime, and Hulu to having just one of them and canceling any subscriptions that you rarely or never use.

Dave Hancock, 35, a foster parent from Indiana who has fostered 16 children with his wife over the past 10 years, says that "planning ahead is huge. You quickly learn where to spot bargains at places like yard sales, Goodwill, and department stores. Local foster closets (places where donations of clothes, bedding, furniture, etc. are given to help foster families) are a tremendous blessing." He adds that "budgeting is also a life skill you'll quickly learn, if you don't have that attribute already. Coupons and buying in bulk are your friend."

Set up an emergency fund.

As a foster parent, you need to plan for the unexpected. While the state will cover medical costs and provide insurance, it does not account for car breakdowns, work hours lost, or the cost of braces, for example. To avoid dipping into your life savings, set up a separate foster emergency fund, which you can use when a curveball comes your way.

The emergency fund can be especially useful in sticking to your budget. If you lose work hours in a particular month, you can dip into these savings to cover costs, and replenish them the next month.

Consider lost work.

"When we started fostering a newborn, because she was so young, we couldn't put her in daycare, because daycares in Oklahoma don't accept children younger than six weeks," says Kimberly Blodgett, 46, a foster parent from Oklahoma who has fostered four children over the past four years.

"At the time, my husband and I both worked full-time," Blodgett continues. "I am a teacher, and my husband works for an energy company. We tried hiring a nanny, but she worked one day and quit, so finding childcare was not easy for us. I decided to resign from my teaching position and stay home with the baby—so that was definitely unexpected, and we had to learn to budget around one income."

With infants, or children with special needs, losing work hours may become the norm. Finding childcare can be difficult and expensive, and sometimes in dual-income families, the best option is for one parent to stay home with the children, even if temporarily.

When accepting a new foster placement, consider if the household could run on a single income, or an income based on fewer work hours. "We weren't expecting the lack of childcare issue to lead to my resignation," Blodgett adds, "but it has been worth it." She notes that this potentially necessary change is "definitely something foster parents should prepare for and consider."

An image of a woman hugging a child.
Getty Images.

Build and rely on community support.

Fostering can be a challenging experience, and community support is essential—even financially. Relying on community donations and free occasional childcare can make a world of a difference. Joining support groups or a foster parent network can help teach you all the tips and tricks and where to get the best deals—whether that's on everyday products or low-cost medical service providers, suggests Rene Denfeld, 54, an Oregon-based foster parent who has fostered on and off for 25 years.

"Don't be afraid to look for help in the community," Denfeld adds. "I'm a working single mom, and at first finding dependable summer daycare was a struggle. Then, I learned many places offer scholarships. My kids got to do some really great day camps, like a rock climbing camp, that we couldn't otherwise afford, because of scholarships."

Get creative.

Having fun on a budget, while also providing everything that your child needs, can feel like a challenge. However, if you're willing to get creative, it's definitely possible. A low-budget birthday party at a park with all of kiddo's friends can be as exciting as a party at a fancy restaurant. This will allow you to save your money for the more essential things, such as medical and educational expenses.

"Children need love, consistency, and your calm, positive, happy good nature more than they need fancy things," Denfeld says. "Your time is more valuable than anything you can buy. Money is not the secret sauce to fostering; you can do it on a budget. I did for many years. You can find so many fun things to do with kids that don't cost anything at all, like playing in the park or making artwork together. Save your money for what the kids really need."

Managing finances on a budget can feel difficult enough when you aren't fostering children, and even more so when you are. But with a little bit of pre-planning, and support from state and private agencies, you can make it work.

As Hancock explains: "If you think you're going to make some sort of financial windfall by fostering, you're wrong and not in it for the right reasons. Fostering is all about providing a safe, loving home for a child who otherwise wouldn't have that. There's plenty of assistance out there if you know where to look and are willing to accept it."

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