NerdWallet's Smart Money Podcast - The Price of Parenthood: What It Takes to Adopt

Episode Date: June 15, 2023

The price of adoption can vary greatly — from under $1,000 to over $60,000.  In this episode of our nerdy deep dive into the price of parenthood, Sean and Ronita explore the various avenues and expenses associated with adoption. A dad now in the adoption process shares his experiences, and a financial planner unpacks questions you should ask if you’re considering adoption. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

there are lots of ways to have a child and all of them carry a price tag, including adoption. But here's some perspective on that price tag. It's not a small number, definitely. But it's all relative though, right? Like $40,000 is not a small chunk of change in any way, shape, or form. It's also about the average cost of a new car. You know, so it's also not an exponential expense that people don't usually deal with. Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles.

And I'm Runita Chowdhury-Wade. We're on to the second episode of our nerdy deep dive into the cost of parenthood. Last episode, we looked at the price tag for having children no matter how they arrive in your family. And it's a steep one for that bundle of joy, that's for sure. Today, we're going to talk about what it means to adopt a child and how to best prepare your household finances for what is often a long, drawn out and expensive process. Yeah, Sean. And let's also make sure that we say that for most parents, any cost is outweighed by the love and affection and joy and millions of laughs that children bring into our

lives. We are aware here that having children is not all about the money. But this is a money show. And our hope here is to give folks an idea of what it takes to have children via different methods. And as you said, how to best prepare financially. I'm really glad that you said that. It's an excellent point that we don't want to get lost in all of this talk about budgeting. And listeners, we want to hear what you think too. We'd love to hear your stories around the decision to have a kid, especially around your finances. Leave us a voicemail or text the Nerd Hotline at 901-730-6373. That's 901-730-NERD or email a voice memo to podcast at nerdwallet.com.

So Renita, where do we start today? Well, today we're on a mission to help explain the process of adoption. The motivations to adopt a child run a wide spectrum from an inability to reproduce biologically to simply wanting to give a child a home who may not already have one. As we mentioned before, it can be a long and involved process with a lot of emotional and financial difficulties. Yeah, I can imagine. So and involved process with a lot of emotional and financial difficulties. Yeah, I can imagine. So can you give us a sense of how prevalent adoption is in America? Sure. The most recent survey from the National Council for Adoption found that more than 115,000

children were adopted in the United States in 2019. 57% of those were public adoptions, so through foster care or other government services. The rest were private. But the overall number of adoptions dropped significantly in 2020, to just over 95,000. Of course, we have a small news item that year that changed just about every metric out there. So yes, the pandemic is a likely contributor to that drop. But here's another statistic to think about. Some 391,000 children are currently in foster care in the U.S. waiting for homes. Wow. Okay. Well, let's talk about how folks can start thinking about whether they might want to go through this process. Who are we hearing from first? Well, fortunately, I happen to have a close friend

who's going through this process right now and agreed to share his story with us. Edgar is 37, lives in New York, and spends much of his day working as a creative director. He and his partner, Tom, are hoping to adopt and are still awaiting word on when that might happen. Hi, Edgar. Thanks so much for coming on Smart Money. Okay. Thank you for having me. I'm super excited. Now, we met how many years ago in college? It's got to be 17? Yeah. Oh, my gosh. I mean, we've known each other from being like broke and single on study abroad. And now here we are as people who are considering being parents. That's crazy, right?

It is wild. When or what do you think led you to decide to be a parent? Yeah, that's a good question. So I think I went through a bit of an evolution on this because being a gay man growing up in Texas, like in high school, I was like, oh, I'm never going to be a dad. But I think it was just self-preservation of being like, oh, I don't think that's something that's an option for me. But the world changed and opportunities have opened up. And then when I met my now husband, Tom, we've been together for a very long time. Being a dad was something that was super important for him too. And, you know, I realized that it was for me as well. And we began our journey together, I think three years ago, specifically about wanting to be dads and starting our adoption process.

And how long has it been for you and Tom? Like, how long have you guys been together? We've been together for 13 years at this point, and we have been married for five. So it's been a while. Oh, wow. It's been a bit. So Tom is your partner, and you and Tom are in the process of adoption. So tell us more about that decision. When we came to the conclusion that we wanted to see if we could start a family, you know, there's a couple of options that get presented in front of you. Obviously, we're two men, we couldn't do the original route. So we had to find some other alternatives. And this isn't exhaustive, but some of the ones that we looked at were obviously surrogacy, which is one of them. You could go through the government, whether you do basically foster care to adoption

or private adoption, where you go through an agency. You can also do private adoption through a lawyer. So there were a lot of different things that we considered. And after discussions and figuring out our options, both from a personal perspective, what felt right for us, and also weighing in the financial implications of starting a family, we realized that adoption and going through an agency was the right choice for us. Right. And parenthood itself is an expensive proposition for anyone, but adoption is above and beyond cost-wise for a lot of people. What kind of discussions did you and Tom have about what

this process would do to your bottom line? You know, we've been on this process for so long. I think before we even got to the agency, which has been three years now, we probably talked about it for a year or two before then. So we're talking maybe five years of discussion at this point. And when we first started the process, we were a little earlier on in our careers. We didn't make the more comfortable salaries that we have now. So it was much more of a financial discussion then. You know, I think we looked at adoption, we got a general sense of what the cost would be. And we knew that with like some savings and just being smart about our decisions that it felt like an option that would be viable to us. Do you feel like you had a handle on the cost issue fairly early on in the process,

or how did you go about budgeting for it? We knew pretty early on because we were, I mean, I think the agencies are fairly transparent, and we wanted to know what we were getting ourselves into. So for our agency, the cost for the adoption is approximately $40,000. What's good in some ways is that like you pay for it in installments based on where you are in the process. So you pay the first quarter of that money when you start the process to begin. And then once your home study is completed, and that can take months, it's like where you go through paperwork mountain just to make sure that your finances are in check, Like everything that goes into them

took us about a year to go through that process. Once that process is done, you pay the other 25% and then you're considered a waiting family. So we've paid off half of that cost at this point, and we've been a waiting family for two years. So in some ways it helps you sort of budget it by default because it sort of does it for you. But then outside of that, we wanted to make sure that we didn't get too far in the process without having that savings in our bank account in case it happened. So at any point, we could get a call that we've been placed for the adoption and that will be the other 50% that needs to be paid up front. We planned ahead of time to make sure that we have the resources in check for when it was coming so that we would be prepared for the financial part of it. How did it feel when you first saw that number? $40,000 is not a small number. It's not a small number, definitely. But it's all relative though, right? Like $40,000

is not a small chunk of change in any way, shape, or form. It's also about the average cost of a new car, you know? So it's also not an exponential expense that people don't usually deal with. That's a great point. Actually, I didn't think about it that way. Maybe that's not the right way to think about it, but I was like, you know, kind of. And, you know, like if we look back at the process of it, what were your expectations for how it was going to go? That's an interesting question because I think what I've realized over time is how little I knew when I started the process. So I don't know that I had very regimented expectations of what I wanted it to be or what I was expecting.

At the very beginning of the process, you're told, you know, what the waiting process is like and what that looks like. But I do think one thing is to like hear that it could take two, three years to adopt. And the other thing is to actually live those two, three years where, you know, you know, you're optimistic that it's going to happen, but you don't really know when it's going to happen, which makes it hard to plan. And also sometimes hard to keep your emotions in check because you're excited and you just don't want to be excited for no reason. And sometimes it can be like a year without hearing anything, you know? So from that perspective, I think the expectations of the way, even though people told me, I don't think I fully understood them until I went through it. Right. You might get a call at any time. You kind of have to be on

your toes and be ready for it. At any moment, you're right. An infant could come into your life. Like, do you have a car seat? Do you have diapers? Do you have formula? Like all that sort of stuff. You don't want to be scrambling, but you also don't want to have a place in your home where you have all that information, where you have all of those things visible, where they're just a constant reminder that's like nagging at you that the baby isn't here yet. So one of the things I recommended to us is like, find a place that's hidden where you can keep some of those things, but they're not like out there. So like they don't recommend creating a baby room at this point. So for us, we do have a list of things that we've bought, but we've kept just to the essentials and they're in our garage.

Wow. I didn't realize how much anticipation and prep goes into it. I did want to ask you as a question, what differences do you think you experienced or are experiencing as a gay couple versus if you weren't as you go through this process? Yeah, that's an interesting question. I think whether you are a straight couple or a gay couple or a non-binary couple, the experience is mostly the same, but you do, I guess, as a LGBTQ couple, have to be mindful of the agency you're going with. You know, so our agency was accepting of everyone. That wasn't a precondition. And I don't know that every agency is like that, especially some of the ones that might potentially be, you know, linked to some religious organizations. So that was the one thing we kept in mind. But I think once you start the process through the agency, if your agency is good and treats everyone equitably, it's pretty much the same experience. I know that earlier we were talking about the money involved here. Did insurance come in at all

or work benefits? So for now, we've relied on our savings. For adoption, I don't think in any of either of our insurances, they factor in in any way, shape, or form. I'm lucky that at my job, there is a family planning benefit that provides you a certain amount of money to help build a family. And it's provided to all employees. It was a happy surprise for me because I started this job a couple years ago without even knowing this was a benefit. And I was talking to HR about, you know, the parental leave that I'd like to take and asking questions and like, do you even know we had this? And I was talking to HR about, you know, the parental leave that I'd like to take and asking questions and they're like, did you even know we had this? And I was like, no. So, you know, it's something that you keep in mind and make sure that you ask about it because there might be a benefit there

that you hadn't even asked about or thought about that could potentially really bring down the financial cost of this. That's a great tip to look into that. We often, when there's so many, you know, pages and pages of documents, it's easy to miss family building benefits that now exist that definitely were not there before. They're really great. What advice would you give to someone else who's considering adopting a child? And then what's the advice for mentally, emotionally, and of course, financially? I will start with probably the easier one, but just financial because those are numbers and numbers are always easier than emotions

in my book. Anyway, when you're going to go into the adoption process, make sure you ask a lot of questions. You look around, you do your homework about what the financial costs are going to be, because it's going to be really important that you feel comfortable going into the process knowing that you have enough savings, or it's something you can cover before you get into it. There's the agency fee that you pay for the service they're providing. Then there's also going to be eventually some legal fees as the adoption becomes finalized as you know, things get formalized through the the state you need a lawyer to help you do all of that um so those are additional fees that like aren't the adoption fee necessarily they're extra so you'll want to get a good sense of like what those are too so that you're prepared for

those when the time comes because like with most adoptions it's a surprise in terms of how to prepare for adoption emotionally and mentally i think it's like coming in and being clear-eyed about how long the process can take. And the way I always see it, and this is specific to my agency, they want to do what's best for the birth mom and the baby. So if there's a way that they're able to support them so that they're able to stay together, they will always do that first. So the fact that things are taking long, while it can be difficult, to me, it's gratifying in knowing that it's because the agency is doing their due diligence. And when it happens, it's going to happen because it's meant to be. We didn't come into this trying to put ourselves first. And I think as part of that, putting the baby and the family

come from first, at least for us, that's the process going through what it needs to go through to be done right. And lastly, and as a future auntie, what are your hopes and dreams for your little one? Oh, well, honestly, like I would want the little one to live a fulfilling, happy, healthy life where they learn to treat others with love and respect. Hopefully we can instill, you know, a sense of love and kindness and create someone that or help to grow someone that is going to be happy, loving, empathetic, and yeah, hopefully joyful. Thank you so much, Edgar. I can't wait to meet the little one when they arrive. Oh, thank you so much. And I can't wait for them to meet their auntie Ronita. Thank you so much for having me. This was a pleasure. Wow, I can't believe just how long Edgar and Tom have been waiting to adopt. Three years is a really long time. But it seems like the weight and the costs will be well worth it when they finally do have a child.

Absolutely. And that three-year time that they've been waiting, I mean, that's just the average. So there are prospective adoption parents out there who have been waiting even longer for their child to come home. But I do hope that Edgar and Tom's little kiddo is here soon. Yeah, me too. Okay, so this process really is incredibly involved, time consuming and money consuming. It is. So to get some idea of the particulars of preparing your finances for adoption, I talked with Christopher Stroop. He's a financial advisor with Abacus, and he specializes in financial planning for people who identify as

LGBTQ+. Christopher Stroop, welcome to Smart Money. Hey, thank you for having me. I'm happy to be here. To get started, from what I understand, there is a huge range when it comes to how much it costs to adopt a child. What is that range and why is it so complex? You're totally correct. The range is pretty large. On the low end, the cost of adoption could range from non-existent. Should you find yourself pursuing adoption via the foster system with assistance of state funding programs that could alleviate many of the costs. Whereas on the higher end, adoption could run north of $50,000 if you

ultimately elect to pursue an international adoption with the help of an adoption agency. The complexity behind adoption is really a derivative of the pathways available to adoption and that a lot of people must work together to make adoption possible. Unlike pregnancy and childbirth, where it's mostly the doctors and the birth mother working to unite the baby with the family, there are more people involved in adoption, such as attorneys and adoption agents, as well as sometimes birth parents and medical professionals. So while birth parents pay exorbitant costs to medical professionals, adoptive parents end up paying other professionals for these services, such as handling the appropriate paperwork and finding the child. You know,

these expenses can vary widely and add up quickly depending on your chosen adoption journey. Yeah. So on that point, and you touched on this, that there are different types of adoption available. Can you explain those for us? Yeah. There's a lot of pathways to becoming a parent via adoption. First off, you have domestic versus international adoption. Domestic adoptions could average $25,000 to $48,000 and typically include a range of fees from home study and legal services to document preparation and birth family counseling. Should you go with the international adoption, you know, the average cost is about $35,000, but can be upwards of $50,000 to cover additional expenses like passports and translation

costs. Another type of adoption is private agency versus independent adoption. You know, when working with a private agency in the United States, the average costs could range from $30,000 to $48,000. If you elect to adopt independently, where the birth mother chooses the adoptive parents, it can be slightly less expensive, with costs ranging from anywhere from $25,000 to $38,000. And really, there's one additional pathway. It's becoming an adoptive parent via the foster system. Compared to adopting through a private agency, adoption through foster care is usually funded by the state. So fees are minimal or potentially even non-existent. So how would one choose which avenue would be best for them? parent via adoption is a deeply personal decision with numerous factors to consider. We're just talking about the money really here. And to help with your journey, I would ponder really four key

questions. The first being, do I wish to adopt domestically or would I rather navigate an international adoption? Some key differences between adopting domestically versus internationally include the age of the child. Adopting a newborn is only possible domestically. Beyond age, a more holistic medical history is usually provided with domestic adoptions than international ones. Many adoptive parents who don't want contact with the birth family choose to adopt internationally. However, several countries do not allow LGBTQ plus people to adopt. The second question I would ask is, do I want to adopt via the foster system? It's one of the most affordable ways to adopt? The second question I would ask is, do I want to adopt via the foster system? It's one of the most affordable ways to adopt, does not always guarantee a permanent placement. The third question

to ask, I would say, is how much information do I want to know about the child prior to adoption? And your answer to this really helps guide you to pursuing either a closed adoption or an open adoption. Open adoptions grant adoptive parents access to more background information about the child's family and provide an opportunity to ask questions. However, sometimes the adult's roles may be a little muddled in that situation. While closed adoptions avoid this potential issue, adoptive parents in closed adoptions are generally less informed about the child's background beyond medical history. And when I think about the last question I would want to ask is, do I want a private agency adoption or an independent adoption? You know, if you choose to work with a private agency, you're more likely to

pay an all-inclusive fee, whereas the responsibility for finding professionals like an attorney lies largely with the adoptive parent if you decide to adopt independently. Yeah, so going on that, aside from the fees you've already mentioned for the process itself, what are some of the legal costs involved in adoption? Do you generally need legal counsel? Yes, you're definitely going to need legal counsel. And it's important to note that legal fees vary widely depending on if the family is working with the agency or if they've decided to pursue the independent adoption route. Families working with an agency will have most of their attorney fees covered through the initial adoption process. And the average cost of attorney fees with the private agency adoption is about $4,500. Families adopting independently will need

to rely more heavily on an adoption attorney to help navigate the terms of the adoption. And as we know, attorney fees vary widely by state and length of time required to complete the adoption. So for independent adoptions, expect legal fees to run between $7,000 to upwards of $15,000. What would you suggest is the best way to start budgeting for the adoption process? You know, it's really important to plan ahead. And a great place to start this journey is to evaluate your finances with a financial advisor. They can help you understand how the adoptive journey fits into your overall financial plan, how much capacity you have to cover expenses on your own, and what additional resources could be leveraged to fill any short-term

funding gaps. One way to think about budgeting for the adoption process is to research your funding options, which can include the government grants or even personal loans. If you own a home and have a sizable amount of equity in the property, perhaps a home equity line of credit could make sense for you in terms of helping you navigate and pay for your adoption process. Another budgeting step is to add to your emergency reserve. The general rule of thumb is to keep three to six months of expenses in an emergency reserve to prepare for an adoption. Consider funding your reserve to something more like six to 12 months worth of your new expenses.

So you're prepared should an unexpected hurdle happen as a result of the adoption process. And lastly, lean on your community. Consider tapping into your community and invite them to donate via Adopt Together or some other crowdsourcing platform that can help alleviate some of the costs for you. And one other area that came up in our conversation with Edgar was that he actually had benefits from work through insurance that he didn't know existed. And it took him some time to actually realize and learn from HR that they do have family building benefits. Can you talk a little bit more about what kind of workplace benefits there might be when it comes to adoption?

Absolutely. You know, first, it's worth checking with your employer to see if they offer any adoption assistance programs. Most frequently, employer provided adoption assistance can cover a host of fees, including public or private agency fees, court costs, legal fees, among many others. So it's really important that prospective parents really read the details of the parental leave policy carefully to understand if it'll apply for them. And really the last thing I would look at is insurance coverages. For example, when it comes to health insurance, adoption is considered a qualifying life event, which would allow you to make a change in your coverage that could better protect your family as it expands.

One more area of benefit. Tell us about the adoption tax credit. What's involved and how much help can prospective parents get? Yeah, so for adoptions finalized in 2023, the maximum amount a family can receive as credit is $15,950 per adopted child. So if they adopt multiple children, this can be multiplied. It's important to understand that there are qualifying expenses, and these are any necessary expenses for adoption, which could include the court fees, agency fees, attorney fees, among many others.

The timing of claiming the tax credit really depends on the type of adoption. For foster care and international adoptions, they must be finalized before you're able to claim the adoption tax credit. In a domestic adoption, parents can either file for the credit when the adoption is final or in the tax year following the expenses being paid. One important thing to know is that there are income limits in order to apply for this tax credit. In 2023, families with a modified adjusted gross income below about $239,000 can claim the full credit. If your modified adjusted gross income is above $279,000, you would not be able to qualify for the credit. If your income falls somewhere in between, you would get a partial credit. Ultimately, it's really important that you speak with a qualified CPA to help you understand

how much of the tax credit you may be able to utilize. You know, as we kind of round out here, do you have any words of advice for LGBTQ plus prospective parents? Yeah, I think one, it's doing your due diligence on the agencies that you may be working with. Not everyone believes that LGBTQ plus individuals can be parents. And so it's navigating those waters to ensure that you're working with an agency that sees you as being a valid parent. In terms of other concerns or costs that prospective parents should think about, one, understand future expenses. Your expenses and your bills will change when a child comes

into the picture. So start considering how these changes will affect your groceries, your transportation, healthcare costs, and other budget categories. It's also important to examine childcare costs. We all know that the cost of childcare is on the rise. You know, consider what your family goals are and look at your current incomes. Also, don't forget to look at college expenses and your options for college savings down the road. You know, if you ultimately want to help this child pay for higher education, either in part or in full, you're going to want to start saving for that as soon as possible. One of the last things that I think LGBTQ plus parents should really think about that might be, quite frankly, most important is taking care of their estate plan. Part of preparing for a child is setting up legal

protections for them and the assets they may inherit from you. Estate planning is especially important when you have a child because your estate plan will establish a guardian and ensure that your assets are ultimately distributed the way that you wish to your inheritors. These are great tips and things to remember as someone gets on this journey. Christopher, this has been so helpful. I feel like I've learned a lot.

Thank you so much for talking with us today. Hey, thank you so much for having me on. This is a real pleasure. That was really fascinating. I mean, the huge range of expenses and experiences around adoption, I found to be a bit staggering. And I'm also thinking about the cost of raising a child to 17, that $300,000 price tag that we heard in the last episode. For parents who go the adoption route, they might want to tack on an additional $30,000 to $50,000 onto that figure. I know becoming a parent isn't exactly a financial decision purely, but the numbers are a lot to grapple with. Absolutely. I mean, these numbers are very,

very large. And I know, Sean, we heard all about my story in the last episode. And if you don't mind me asking, and if you want to share, whether you and your partner have talked about having kids. Yeah, we have. My partner Garrett and I are open to it, but we're both in agreement that we want our lives and our finances to be a little more established before becoming parents, kind of like the situation that you and Jeremy were in a few years back. And since we probably would go the adoption route, I'm now very familiar with just how much we'd have to save up before it's even feasible for us. I'm so glad that this is a learning process for the both of us.

We're both coming away learning a lot about, you know, what it's going to require. And yeah, I hear you on wanting to get things in order before becoming parents. Yeah, but all of this information we're learning is incredibly helpful for planning for pretty much any eventuality. So, Ronita, tell us what's coming up in episode three of the series. Well, one of the great scientific breakthroughs in reproductive choice of the last

few decades is the fact that you can delay childbearing by freezing your eggs. That is, if you have the financial means to do it. To be able to freeze your eggs for any reason, I think is a pretty new thing in the benefit world. I've been putting money away, but I was thinking more long-term thing. But hearing that that was an added benefit at work made me really kind of turn on the jets of thinking about it more. For now, that is all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Visit nerdwallet.com slash podcast for more info on this episode. And remember to follow, rate, and review us wherever

you're getting this podcast. This episode was produced by Tess Figland and myself. Sean Piles helped with editing. Kim Lowe helped with fact-checking. Kaylee Monaghan mixed our audio. And a big thank you to the folks on the NerdWallet copy desk for all their help. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.