When Clare Tattersall and her boyfriend decided to have a child, marriage wasn’t top of mind.
“Time was obviously a consideration for us,” says Tattersall, who became pregnant at age 41. “And we only talked about having a baby, not of marriage.”
Before the baby talk, Tattersall and her boyfriend were already in a committed relationship. The couple had previously registered as domestic partners. And Tattersall had even been on her boyfriend’s health insurance when she worked as a freelancer.
The couple didn’t need to sign a marriage contract to feel committed, says Tattersall, who works as owner and designer at Primrose & Wilde, a private client fashion label in New York City. “I think having a child is a far greater commitment than getting married,” she says.
The financial challenges of having a child outside of marriage didn’t worry the couple either. Instead, their big consideration was how to handle health insurance. “We wanted to address that,” Tattersall says. “For everything else, we rolled with the punches.”
[See: 10 Ideas for Dating on a Budget.]
Tattersall is not alone. About 4 in 10 births are to unmarried women, according to federal data. And while raising a child outside of wedlock isn’t always a choice a parent gets to make, sometimes, like in Tattersall’s case, the decision to remain unmarried is intentional.
But entering into parenthood without first walking down the aisle has its own unique financial planning challenges. Here’s what to know.
1. It can be tough to live on a single salary. Not all unmarried parents are single parents. For those who are going it alone, making do on one income raises specific financial hurdles.
“Every financial challenge is more difficult if you have a single income than a dual income,” says Liz Deziel, senior vice president and Twin Cities head of banking for the Private Client Reserve at U.S. Bank.
One common pitfall for single parents to avoid, experts say, is focusing on paying for their child’s needs at the expense of their own retirement accounts.
“Save for retirement,” says Michelle Scarver, wealth advisor at Exencial Wealth Advisors in San Antonio. “No one’s going to loan you anything to retire on.”
[See: 13 Money Tips for Married Couples.]
2. Think about taxes. Depending on your financial situation, getting married and filing taxes jointly may be beneficial — or it may incur a penalty.
“It depends on the relative salaries whether you have a marriage bonus or marriage penalty,” says Steven M. Rosenthal, senior fellow at Urban-Brookings Tax Policy Center at the Urban Institute.
Meet with a tax accountant and do the math. For some couples, signing a marriage certificate can drive up their annual tax savings.
3. Consider life after you’re gone. Without the built-in legal protections of marriage, couples or individuals raising children need to make doubly sure that there’s a plan in place for their child if one parent dies — or becomes disabled.
“If you’re not legally married, and if you don’t plan, then everything will pass according to the law,” Deziel says. “And if you don’t have everything spelled out in a will or other legal documents, then [things] won’t go as you’d like them to go.”
Considering life after your death may involve meeting with an attorney to draw up documents, spelling out who will take care of your child and where any savings, insurance payouts and other assets will go when you’re gone.
Unmarried parents may have to take a few extra steps to ensure they have the financial systems in place that marriage automatically ensures. When you’re not married, “you do have to do more planning,” says Ed Vargo, certified financial planner and founder and private wealth manager at Burning River Advisory Group in Cleveland.
While these topics may not be fun to discuss, it’s important that couples entering parenthood have them.
“If you’re responsible for another human being now, and the financial future of the child is on the line, there’s a level of responsibility there, whether it’s fun to deal with or not,” Deziel says.
“If you don’t do the pre-work, you’re more likely to have conflicts down the road,” she says.
[See: 10 Money Questions to Ask Your Parents.]
Tattersall and her boyfriend eventually married when their daughter was 2-and-a-half years old. The wedding was a celebration and a party, she says, with her daughter as flower girl. Their daughter is now 9 years old.
But for Tattersall and her husband, the commitment was always there. “You’re going to be stuck with the other person for at least 18 years, and you’re going to have to communicate with them,” she says. “I think everyone should do what is best for them.”
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