For most people, having kids has a longstanding place at or near the top of their life goal list. If you’re reading this article, I’m guessing that children are somewhere in your life plan — however vague that plan may be.
Unfortunately, having a child comes with an unwanted bonus: the cost. In today’s world, it is not cheap. In fact, according to the U.S. Department of Agriculture, the average cost of raising a child for a middle-class married couple is nearly $14,000 per year, from birth through age 17. And that figure can vary wildly, depending on where you live and your life situation.
You have enough trouble juggling your bills, building up savings, and paying for the things you want to do as it is. How could anyone possibly cope with childcare expenses on top of that?
The reality is that millions of Americans handle it every day, and that you probably can, too. All it takes is some planning, some sacrifices, and a big commitment to parenthood — and all that entails, both good and bad. Someday, your wallet will forgive you.
In this article we’ll explore the costs involved and see how you can begin planning.
The cost of childbirth and talking to your insurance provider
Let’s not beat around the bush; the United States is by far the most expensive place in the world to give birth. If you have a normal childbirth, you can expect an average cost of around $10,000. If there are any complications, that figure can increase drastically.
Having a good health insurance plan is key in moderating this cost. As you begin to think about having children, you should talk to your insurance plan administrator to determine how much will be covered, and how much you will have to pay.
Use a Flexible Spending Account (FSA) to tax-advantage your delivery costs
You might want to set aside money to pay your portion of the delivery costs in an FSA, if you have one available through your employer. This account lets you pay for your childbirth costs using pre-tax dollars, which saves you money. The payments to fund the account are also deducted from your paychecks throughout the year, which spreads out the cost. The one catch with FSAs is that if you don’t use the money by the end of the year, you may lose some or all of it. However, your plan may have a brief grace period or allow you to carry over a portion of the funds into the next year.
Check on the cost of adding a dependent to your health plan
This would also be a good time to ask your plan administrator about the cost of adding a dependent child to your insurance coverage, as well as the procedure for getting them added once they are born. You don’t want to start figuring out your child’s healthcare coverage while you’re in the recovery room. Keep in mind the cost to add your dependent is generally presented in pre-tax dollars. The impact on your take-home pay will be a bit smaller than the quoted figure, depending on how much income tax is deducted from your paycheck.
You should also ask your plan administrator about how to get your free breast pump when it comes time. Health insurance providers in the U.S. are required to cover the cost of a breast pump.
Plan for your time off from work
Lastly, check on your employer’s maternity and paternity leave policy. If you don’t have paid maternity or paternity leave, or if you are self-employed, you will need to save money to cover your expenses during your time off.
Getting your world ready for your baby
Before your baby is born, you will also need to gather all the baby-rearing gear needed to get your car and home ready. At a minimum, you will need a car seat, clothes, swaddling blankets, bottles, and a place for baby to sleep.
Head to your big box store of choice and take a look at your options. You can likely piece together a nice baby gear kit for $1,000, but you can also spend a lot more if you want to get everything or opt for more expensive brands.
Stick to baby essentials or buy used to save
That said, if money is tight, you can also spend a lot less if you stick to the essentials, get some items (particularly furniture) used, and maybe even get some hand-me-downs from friends and family. The one thing we really recommend you buy new is your infant car seat — if a seat has been in an accident before, or if it has passed the manufacturer’s expiration date, its safety may be compromised.
Keep in mind that you don’t need everything for your baby’s first year on day one—for instance, you won’t need a high-chair until your little one is old enough to sit up and is eating solids.
Don’t forget that a mom-to-be will also need to add to her wardrobe as her pregnancy progresses and she needs maternity clothes.
Lastly, you may find yourself in need of more living space, or a different automobile to transport yourself and your child. Keep this in mind as you plan — these are obviously very large expenses.
The good thing is that your friends and family know all about the cost of raising a child — they may be willing to help with some of these startup costs, or even throw you a baby shower.
Getting a handle on the monthly cost to raise a child
Once your little bundle of joy enters the world, you will be faced with new monthly expenses that you need to account for. We recommend that you make a list of all your expected costs so you can plan how (and if) they will fit in with your income and existing expenses. Here are some common expenses that you can expect:
If you plan to breastfeed and it goes according to plan, there will obviously be no tangible expense (beyond the cost of the extra 500 or so calories a day that a breastfeeding mother needs). But keep in mind that not everyone is able to breastfeed, and if it turns out you can’t, you will need to pay for formula. Baby formula is fairly expensive, and you can expect to pay at least $100 per month (on average) over your child’s first year.
Once your child moves on to solids, you can expect to pay $75 or more a month on baby food. Be realistic about what you will want to feed your child, too. If you buy organic baby food, this cost will increase.
After that, you are basically feeding a smaller version of yourself, so plan accordingly. On the flip side, you probably won’t be going out to nice dinners as often, so you can chalk up some savings there.
Childcare is where child costs can get really expensive. If you’re a couple and both of you will remain employed after maternity leave ends, or if you’re a working single parent, you’ll need to make arrangements for childcare. Childcare options could include a daycare center, a nanny, a nanny-share, help from family, or some combination thereof.
The cost can vary a lot depending on what you choose and where you live, so you should research specific options in your area early on and price it out. Also keep in mind that in some areas, many daycare centers have waiting lists, and you may need to get your child on a waiting list before they are even born!
If you’re a couple and one of you plans to spend time as a stay-at-home parent, you will also need to factor in the cost of that person’s lost income.
There’s a balance here when you look at it strictly from a financial perspective. You may find that daycare is more economical than a full-time nanny or losing a stay-at-home parent’s income when you have one child. But if you have a second child down the line, daycare costs will effectively double, while the same parent or nanny can take care of two children.
Clothing and diapers
In your baby’s first year, there will be quite a few wardrobe changes. Your baby will likely outgrow each size of clothing within 3-6 months (or even less), so you’ll need to be well-stocked. You should also account for seasonal weather when shopping for baby clothes. Will it be cold or hot outside when your baby needs their 6-9 month sized clothing?
As far as diapers are concerned, you will use a lot of them, and you will never want to be caught without one. Whatever you decide to do for diapers, make sure you account for this in your budget. You should expect to pay at least $50 a month for diapers, depending on the brand you choose.
It’s no secret that college is more expensive than ever. If you hope to help pay for a college education for your child someday, it’s best to start saving early. Generally, the best way to do this is by setting up a 529 savings plan, which lets you earn interest tax-free until the funds are withdrawn. And when it comes time to tap into these savings, they will not be taxed as income as long as the funds are used to pay for qualifying education expenses.
How much you set aside for this in your budget is up to you—just remember that when it comes to college savings, every little bit counts.
It’s always important to have an emergency fund, but it becomes especially important when you have a baby relying on you to take care of them. Make sure you either have an emergency fund in place, or that you are contributing regularly to your savings to establish one. The rule of thumb is that you want to have three or more months of wages in savings. However, anything you can save will help cover unexpected costs and keep you from having to use expensive credit card debt or personal loans to stay afloat.
Balancing expenses and finding a path forward
When you’ve looked at your expected startup and childbirth costs and figured out what your fixed expenses will be at the beginning of parenthood, you’ll know what you need to save. At that point, you can set up a timeline to build those savings.
But what about the ongoing monthly cost of raising a child? You can use savings to help out at first, but if your expenses are too much of a burden you’ll run through those savings very quickly.
In fact, young adults today are having fewer children than previous generations, and worries about being able to afford kids — particularly childcare expenses — are a main reason.
Making big decisions
It’s possible you may need to consider some big changes. For instance, if you live in an expensive area with high childcare and housing costs and you don’t think you’ll be able to afford it after adding in the cost of having a baby, you may want to consider moving somewhere less expensive.
You’ll also need to take a hard look at your monthly expenses and determine what you might be able to let go of. For instance, if you still have cable (do people still have cable?), you may want to cut the cord and rely on streaming services. If you have five streaming services, you may want to consider letting one or two of them go. And if you have student loans, you could look into student loan refinancing, which can reduce your interest rate and save you money.
When cutting expenses, the thing to remember is that little changes add up. Cut one or two subscriptions, economize your grocery shopping, and eat out and splurge less, and you may find you’ve freed up more money in your budget than you originally thought possible.
Taking the plunge into parenthood
However much you plan, making the big decision to have a baby is still a leap of faith. Beyond the financial considerations, it is a huge responsibility and will change your life forever — it’s —adulting” at its finest.
Even if your future seems uncertain (as it always will be), you can rely on the fact that you have what it takes to continually adapt and cope with changing circumstances. From the time you were a baby yourself, life has always thrown new challenges your way. Maybe it is time to teach your little one how it’s done.