There are few things more glorious, or more disruptive, to your life than the arrival of a new baby. Planning ahead to help offset the financial havoc that can accompany adding a new member to the family is very wise. Without some consideration to the financial impact of raising a child, your hopes and dreams for your financial future may face inevitable ruin. The cost of raising a child from birth to age 18 for a middle-income, two-parent family averaged $226,920 last year, according to the U.S. Department of Agriculture, and that figure doesn’t include the cost of college. That’s an average of over $12,600 a year for the next eighteen years for each child your family acquires via birth or adoption. If your child has a medical condition, a learning disorder, uneven teeth, or a propensity to jump off large objects without looking, you may be looking at a much higher number.
Here are some considerations to plan for when expecting a new baby.
1. Maternity leave. With more and more women working outside the home, a loss of income during a medical leave of absence can be devastating to couple. If you’re planning on getting pregnant, be sure you have enough saved to cover this loss of income. Some women prefer to return to work as soon as medically cleared, which is generally six weeks following the birth of an infant. However, many new mothers take an extended leave of absence under the U.S.’s FMLA act. If you suspect you may want to stay home longer with little Junior, you need to plan accordingly to cut back expenses, save up funds, or supplement your income from home to offset the cost.
2. Increased cost of health insurance. Another unexpected cost for new parents is the added cost of covering your new bundle of joy medically. Additionally, you may want to start a life insurance policy for your infant early in life, protecting him or her against the possibility of futural denial because of a medical condition.
3. Baby supplies. While many couples receive a ton of baby supplies through gifts from friends and family and through hand-me-downs, you’ll still need an avalanche of diapers, bottles, clothing, and equipment – like car seats, playpens, swings, and cribs. Avoid the temptation to overspend and buy every single gadget advertised. When it comes right down to it, your baby will need warm clothes, blankets, diapers, personal care items like baby soap and powder, feeding supplies like bottles and formula, and a car seat to get home from the hospital. Keep in mind that the hospital will send you home with some essentials like a bulb syringe and enough diapers for the first few days.
Babies have been known to be perfectly content sleeping in a second hand crib, and they are just as amused with a game of peek-a-boo as they are with musical remote controlled mobiles. Of course, you’ll want a crib, a baby swing, a playpen, and a changing table as basic staples for your nursery, but if you find yourself in a real pinch, you can always purchase these items later or look for second-hand items in good repair. A good budget-conscious compromise is to purchase a pack and play type playpen which serves as crib, playpen, and changing table, as well as being portable. Avoid designer baby supplies, as your little one will quickly outgrow most items, making them a poor investment. Save the designer labels for when Junior is in high school and can wear the items well into adulthood.
4. Transportation. Many couples decide to purchase a safer, family friendly vehicle when expecting. You’ll at least need a vehicle with more than two seats, with easy access to the rear seats for managing car seats and safety harnesses for the next eight years. This added expense can really put a couple’s budget into a tailspin if not planned for in advance. Look for a vehicle with high crash test ratings and car seat anchors. If you’re thinking about purchasing a particular vehicle, take your car seat along and practice getting it in and out of the back seat to see if the vehicle is a good fit.
5. Housing. While the addition of a single child may not affect your housing situation too greatly at first, you’ll eventually want to consider purchasing a home with additional bedrooms, room to play outdoors, kid-friendly neighbors, and access to a good school system. While housing can become one of the largest expenses of raising a child, you can get by initially with your current living conditions as long as the child will be safe in your current home.
6. Childcare. Even if you plan to stay home with your little one, you’ll still need a babysitter from time to time. If you plan to return to work, you may soon find that childcare expenses take a huge bite out of your paycheck. Preschool can start as early as your little one is potty trained these days, and some parents believe that early education is best. That may give you only a couple of years to plan for the added expense of preschool or private instruction.
7. Entertainment. Let’s face it. You won’t be going anywhere for entertainment when your little one is small and helpless for a while. New babies are a bundle of fun. Plus, you’ll most likely be sleep deprived and adjusting to the pressures of parenthood for the first few months. But eventually, you’ll need a date night and some time away with adults. In fact, you may find that you need regularly scheduled time away from the house to preserve your sanity, especially if you are staying home with the baby 24/7. If this wasn’t something you factored into your budget before baby, it may come as a shock how much of a dent regular outings can make in a family budget, especially when you factor in childcare.
What advice do you have for new or expecting parents looking to budget for baby? Did you shop at thrift stores of yard sales? How did breastfeeding or using cloth diapers impact your baby budget?