Budgeting For A Baby
Whoever said children were priceless clearly never had any. Raising a baby to the age of 18 will cost $233,610, according to a 2020 forecast by the United States Department of Agriculture (USDA). That’s $33,610 more than the median cost of a house ($200,000) in the U.S! It’s an overwhelming stat for new parents who want to give their kids the world without entering a world of debt.
We have good news, though! It’s possible to provide your child with everything he or she needs to flourish without sabotaging your financial security. The key is getting your baby budget set up, as best you can, before your due date arrives.
We’ll run through all the essentials you’ll need for your newborn to feel at home, and we’ll give you some tips on how you can afford them.
Pre-Baby Financial Planning
Many new parents buy more than what they “need.” You might want a really nice rug, a really cool rocking chair, or some cute pictures to hang in the nursery. That’s fine, just make sure you buy these things after creating a budget for what you actually need, like food and diapers.
Essentials don’t need to be expensive, especially things like clothes or strollers which you can find at local thrift shops or through family/friends.
Here are some essentials you will need for your newborn:
- Car seat
- Baby monitor
Here are some things to consider buying for your newborn after you’ve covered essential purchases:
- Changing table
- Rocking chair
- Diaper pail
- Rug for nursery
- More toys
- White noise machine
Labor & Hospital Costs
Americans are often astounded by the cost of giving birth. The U.S is the most expensive developed country in the world for childbirth. The average delivery is just over $11,000. That’s more than the cost of a routine delivery in Switzerland ($5,100) and The Netherlands ($3,600) combined. The average C-section in the U.S hovers around $15,000.
The price of giving birth depends on your location and insurance. According to a Health Affairs study, the average cost of delivery for insured women was $4,500. Those giving birth in urban areas will confront the highest costs, while those in the rural south and Midwest take on the lowest.
Here are the most expensive states in the U.S for childbirth (cost before insurance):
- New Jersey – $29,048
- California – $26,380
- Florida – $22,015
- Washington D.C. – $21,243
- Nevada – $21,239
Here are the least expensive states in the U.S for childbirth (cost before insurance):
- Nebraska – $8,805
- Maryland – $8,934
- North Dakota – $9,255
- Maine – $9,623
- Vermont – $10,377
Nursery Costs & Other Home Needs
The cost of furnishing a nursery varies the same way the cost of furnishing your bedroom varies. Are you buying from a boutique? A box store? Garage sale?
Get your hands on some hand-me-downs to save on costs.
Estimates range enormously. You can comfortably furnish your child’s nursery for under $1,000. On the other hand, some people will spend that much on the crib alone. Don’t feel like you have to spend big. Your baby certainly won’t thank you for it or even remember sleeping in it for that matter.
Here are some things you’ll need to fill your baby’s nursery:
- Crib: $100-$400
- Mattress: $50-$100
- Water-proof mattress cover: $15-$70
- Baby bedding: $15-$60
- Nursing pillow: $80-$100
- Dresser: $50-$400
A car seat will cost you $30-$180. This is one of the few things you need to buy new because there’s no way to guarantee a used car seat hasn’t been compromised in a previous accident. There’s no Carfax for infant car seats.
Costs of Adopting a Baby
The price of adopting a baby will vary depending on where you go. Here are the four typical methods of adoption:
- Foster care – $10,000~
- Independent – $15,000-$40,000
- Domestic (adoption agency) – $20,000-$45,000
- International – $20,000-$50,000
Adopting a baby is more expensive than many imagine. It’s a process that requires a lot of paperwork, which means administration and legal fees. There’s no stork; just people who care a lot about making sure this baby finds a safe home. That means you and your partner will be vetted extensively to make sure you have the capacity and the means to care for your new addition to the family. There are also medical and counseling expenses to consider, and if you’re adopting internationally, you have to add the cost of traveling to and from your child’s birth country and dealing with its local government.
Foster care is the cheapest way to adopt. Foster parents are often reimbursed through government subsidies. However, the focus of the foster care system is to reunite families. This is especially the case for younger children. Most new parents want babies, which means older children (above 12) are often overrepresented in the foster care system.
Adopting independently as opposed to going through an adoption agency can save you a little money. Independent adoption is when you find a birth mother without the help of an agency. The agency (or a lawyer) is only called in to help oversee and finalize the adoption process. Forgoing the agency can save you money, but it’s still not cheap. Most of the fees (medical, legal, administrative) are still there.
The costs of adopting internationally can vary the most depending on where you go to adopt. Adopting a baby from China can cost under $20,000. Adopting a baby from Haiti can cost over $30,000. But then flights to China are more expensive than flights to the Caribbean, and you’ll spend more money after a day in China then you may spend after a week in Haiti.
Ongoing Costs of Raising a Baby
According to WebMD, the first two years of raising a baby will run you over $25,000. The good news is it gets cheaper for every child you have. The next kid can wear hand-me-downs and share a room or use an old stroller. Some things will always cost money, though. Food and diapers can’t be shared, not the same way clothes can anyway. Same with medical cost and, depending on the age gap, childcare.
Here are some reoccurring annual expenses to budget for when having a baby, according to WebMD: Parenthood.
- Food: $1,580
- Transportation: $1,790
- Clothing and diapers: $750
- Health care: $1,180
- Childcare: $2,870
- Other: $830. Includes personal care items, entertainment, and reading material.
These prices represent how much middle-income parents spend in a year. Let’s take a deeper look at some of these categories and go over ways to save.
Diapers & Changing Supplies
You’ve got two options here: cloth or disposable. Disposable diapers are what you’re used to seeing and probably what you used to wear yourself back in the day. Cloth diapers are a cheaper and more eco-friendly option.
Most people go with disposable diapers because of convenience. On average, a family spends around $1,000 in the first year on disposable diapers. Cloth diapers cost families between $500-$800 a year. You have to clean them, though. So, you should factor in cleaning supplies to the total cost. You also need to factor in the cost of wipes, oils, creams, and powders you’ll be using to keep your baby fresh and fit.
On average, families spend between $60-$200 on clothes within the first year. This varies greatly depending on your willingness to shop thrift stores and settle for hand-me-downs.
Despite using less fabric, baby clothes tend to cost the same as adult ones, sometimes more. However, your little one will outgrow his or her onesie quickly. There’s no point in being picky or stocking the closet with designer outfits.
Ask friends and family members for their old baby clothes. They’ll thank you for helping them free up closet space. Older cousins, if your siblings have children, are a good place to start.
A lot of people have a negative image of second-hand apparel shops. They recoil at the thought of their baby wearing a faded onesie or tattered booties. However, that’s simply not the case. Most consignment stores do a good job of displaying lightly used materials and will turn away or hold back any donations that are too far gone. Not to mention, the clothes really are lightly worn, since babies outgrow their wardrobes within months and hardly perform enough activity to wear them out. In many cases, you can find stuff (clothes, strollers, etc.) from consignment shops that is as good as new.
Nursing & Feeding Expenses
Breastfeeding will save you money and is reported to be healthier for your baby. According to the U.S Surgeon General, breastfeeding not only protects against illnesses like pneumonia, diarrhea, and asthma, it also can save you between $1,200-$1,500 a year on formula.
Some mothers may be unable to breastfeed or simply prefer bottle feeding. According to kidshealth.org, this is how much milk your newborn will be drinking:
- Newborn: 1.5-3 ounces (45-90 milliliters) every 2-3 hours.
- 2 months: 4-5 ounces (120-150 milliliters) every 3-4 hours.
- 4 months: 4-6 ounces (120-180 milliliters) every 3-4 hours.
- 6 months: 6-8 ounces (180-230 milliliters) every 4 to 5 hours.
Baby formula can cost between $0.10-$0.30 an ounce and those numbers will add up over time. Breastfeeding is cheaper, but bottle-feeding can be more convenient if you’re away often. Breast pumps can also be used to store milk, so you can bottle feed without breaking the bank. In the end, it’s up to you which method you want to go with.
Child Care & Baby Sitting
These prices vary by location. Daycare will run you between $200-$250 a week. A nanny cost about twice that at $565, according to care.com. Babysitting rates are similar and will cost you anywhere between $12-$18 an hour.
Having a relative or close friend watch your child while you’re away would be ideal, but for a lot of us, it isn’t probable. If you’re a couple, one of you may want to stay home depending on how much income you’d have to sacrifice and whether or not you live in a state that mandates paid parental leave.
The U.S lags behind most other developed nations when it comes to parental leave benefits. According to the Organization for Economic Cooperation and Development (OECD), developed countries provided mothers an average of 18 weeks paid time off after giving birth. The U.S does not require companies to pay workers parental leave. Under the Family and Medical Leave Act (FMLA), you can take up to 12 weeks of unpaid parental leave. To qualify, you have to work for a company of over 50 employees for at least a year.
Here are the occurrences covered by the FMLA:
- For the birth and care of the newborn child of an employee;
- For placement with the employee of a child for adoption or foster care;
- To care for an immediate family member (i.e., spouse, child, or parent) with a serious health condition; or
- To take medical leave when the employee is unable to work because of a serious health condition.
Some states do have laws mandating employers to offer their employees paid parental leave. These states are clustered in the northeast or lie along the west coast.
Here are some of the state-mandated parental leave benefits found throughout the U.S:
- California: 60%-70% of income for 6 weeks
- New Jersey: 60% of income for 6 weeks
- New York: 50% (67% by 2022) of income for 8 weeks
- Washington D.C: up to 90% of wages depending on income
- Washington State: up to 90% of wages (maximum $1,000/week) for 12-18 weeks
- Rhode Island: Up to $852 a week for 12 weeks
Connecticut and Massachusetts will begin state-mandated paid parental leave programs in 2021. Oregon’s will begin in 2022.
Medical Costs & Health Insurance
Some adults manage to go years without seeing a doctor thus avoiding the high costs of medical bills, but infants need regular wellness visits to make sure they’re thriving.
You need to contact your insurance provider and let it know about your newborn. Having a baby is a qualifying life event; it qualifies you for a special enrollment period that will let you add your baby onto your health insurance plan.
The American Academy of Pediatrics (AAP) recommends taking your baby in for its first well-child visit the same week of birth. Subsequently, it recommends taking your child in at 1,2,3,6,9,12,15 and 18 months old, again at 2 and 2 ½, and then once a year until the age of 21.
If your baby gets sick outside this window, you’ll still want to get him or her to a doctor. Without insurance, these well-child visits will cost you around $100 each time. With insurance, it’ll range from $5-$25.
If this is your first baby, this may be the first time you’ve ever considered life insurance. About 59% of Americans have life insurance, which you can purchase for around $30 a month. That’s less than the cost of cable and a cheap price to pay for some peace of mind.
Ask yourself this: “If I suddenly died tomorrow, how would my baby be provided for?”
Purchasing life insurance can help answer this question. You can rest easy knowing, at the very least, your child’s fiscal needs will be met.
Saving for Your Family’s Future & Paying off Debt
Right now, your main worry is providing for your newborn and making sure you’re financially secure. In addition to the money you budget for your new bundle of joy, you should set aside an emergency fund, this way unexpected mishaps won’t disrupt your cash flow and jeopardize your family’s security. Aim to set aside at least six months of income for your emergency fund alone.
Let’s not forget about college. Student loan debt has reached crisis levels in this country and there’s little sign from lawmakers that anything soon will be done about it. If you want your child to graduate college with zero or minimal student loan debt, you need to start saving, now.
Here are some ways you can save money for you child’s college:
529 Plan: This lets you save money (tax-free) to be used on higher education expenses. However, withdraw the money for anything else and you’ll get slapped with a 10% tax penalty.
Coverdell Education Savings Account: This is similar to the 529 plan, one difference being Coverdell is not tax-deductible. However, your child won’t pay taxes on the income when he or she withdraws it to pay for school. Max contributions are limited to $2,000 a year and the plan is only available if you fall under a certain income limit: $110,000 for an individual, or $220,000 for a married couple filing jointly
IRA: You can use the money in either your traditional or Roth IRA to help fund your child’s education expenses but pulling the money out before the age of 59 could cost you a 10% penalty, so this option may be better for older parents. If you’re in your 40’s when your kids go to college, the penalty probably won’t be worth it.
That doesn’t mean you should stop contributing to it, though. Saving for retirement can be hard even without the added costs of raising your child, but as your child grows up, you grow old. Eventually, you’re going to need something to fall back on. This is why budgeting is so important; without budgeting, you’re leaving your future up to chance, which is a major risk to take if you care about retiring comfortably.
Tips to Save Money for a Baby
Everybody’s always looking for ways to save money. That goes double for new and expecting parents. Here are a few tips on how to keep your pockets padded as you prepare to welcome your new baby.
- Toy libraries: You can borrow toys from these places like borrowing books from an actual library.
- Breastfeeding: Clearly, this is a personal choice. Just know that if you go with the bottle, the formula will cost you anywhere from $50-$200 a month.
- Have a baby shower: Do we need to convince you of the benefits of throwing a party where people shower you with gifts for your newborn?
- Don’t overpay for your hospital stay: Make sure you know what you’re paying for. If it cost money to watch T.V, grab a book instead. Private rooms are going to cost more than shared ones. Know what your insurance covers and what you’ll have to pay for out of pocket before purchasing any additional services.
- Shop second hand: This can’t be said enough. Your baby, who cannot walk, doesn’t need the latest Jordan shoes, nor does he or she care who Tommy Hilfiger is.
- Homemade baby food: Got a blender? Water? Some mixed veggies? Look up homemade baby food recipes online to save yourself some cash on the grocery bill.
Assistance for Baby Budgeting
Saving enough money to raise a child is a challenge, especially when you’re simultaneously paying down debt. After the baby comes, you’ll still have debts, a mortgage/rent, and hopes for (eventual) retirement. If money was tight before, adding the costs of diapers, formula, baby gear, check-ups, and schooling will require creative solutions to keep from falling even deeper into debt.
Before you decide to tackle all this yourself, try credit counseling with a counselor who can help you put down a budget that covers all the bases and necessities, keeping you on the right track towards financial security.
About The Author
Joey Johnston has more than 30 years of experience as a journalist with the Tampa Tribune and St. Petersburg Times. He has won a dozen national writing awards and his work has appeared in the New York Times, Washington Post, Sports Illustrated and People Magazine. He started writing for InCharge Debt Solutions in 2016.
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