Having a baby isn't cheap, and neither is raising a child. A 2017 NerdWallet analysis found that a household bringing home $40,000 a year generally spends $21,248 before their child's first birthday. This is a major surprise for most parents, with 54% of respondents believing first-year child costs would be $5,000 or less. Even more startling, a full 18% thought that financing a baby's first year of life would cost less than $1,000! If you're starting to panic, don't worry: we've gathered the best budgeting tips to prepare you for having a baby!
Start saving in advance.
Now that you know how much having a baby can cost, it's time to start saving! While many people are afraid of sitting down and creating a budget, this is an important step, especially since many Americans don't have any emergency savings at all. Sit down and look closely at how much money you bring in, where you are spending your money each month, and where you can cut back. We recommend the 50-30-20 rule, in which you 50% of your income goes to necessities like utilities, groceries, and rent/mortgage, 30% of your income goes to desires (anything you don't NEED), and 20% goes to savings. If you can ramp up the savings even more though, go for it! Check out our article on the best apps for saving on groceries as well as some side hustle ideas to make extra cash before the birth.
Don't underestimate the cost of childbirth.
The cost of a hospital delivery and care for mothers averages $13,524, whereas the cost for newborns themselves is $3,660 – more than the cost of a royal birth in England. Any complications, of course, increase the costs. If you have insurance, check the out-of-pocket spending limit for an idea of how much you could end up paying. You should also make sure that you use in-network hospitals and doctors.
Think of childcare options in advance.
One of the most expensive aspects of having a baby is paying for childcare. Infant care can easily cost as much as rent or a mortgage, so be prepared. Make a list of potential childcare options and start shopping around for the best deal. Don't assume that grandparents will automatically want to care for your baby fulltime. If family or friends can help, that is fantastic, but you need to sit down and have a serious conversation about how many hours a week they can devote to childcare. Some employers offer a dependent care flexible spending account which lets you deposit up to $5,000 of pre-tax dollars into the account each year. If you can rearrange your work schedule so that you and your partner can minimize the amount of paid care you need, that could also be a great choice.
Shop around for the best deals on baby gear.
There are some items that you just can't live without when you have a baby, and others that you don't absolutely need but they sure make life a lot easier! You could go the second-hand route, but this isn't always the safest option. You should definitely avoid second-hand when it comes to car seats, and ideally cribs and strollers as well. We have reviews on the best baby monitors, strollers, cribs, high chairs, car seats, baby carriers, and more, so you can make sure that you get a good price for a safe, reliable product for your little one.
Check out insurance options.
In addition to checking out how your health insurance will cover childbirth and your little one, you may also want to look into life insurance and disability insurance options. While you hope to never need them, a small monthly payment could make a big difference down the line if the unthinkable were to happen. If you don't have a will in place, now is also a good time to write one.
Create a post-baby budget.
Once your baby is born, monthly expenses are going to look a lot different. Just as you created a budget pre-baby to start saving, you're now going to need to take into account new recurring costs such as diapers and childcare, as well as once-in-a-while costs like pediatrician apppointments. You should also figure periods of maternity leave into your budget. You most likely won't receive any maternity leave pay, which could mean several months without that income. In addition to saving for emergencies, you should also continue saving for retirement and start a college-education fund. Again, aim for the 50-30-20 budget technique we mentioned above!
While babies are obviously priceless to family members, they are nonetheless expensive. Most people aren't aware of the true costs of having a child, seriously underestimating how much is spent in the first year of life. Careful planning and saving in advance, along with smart shopping techniques, can help you surmount the financial challenges of having a baby.