Tips on budgeting for a baby
The months before your first child arrives are an exciting time. You're focused on getting the nursery ready, baby-proofing your home, and reading what to expect in the first year. But are you financially prepared to have a baby? Make sure your finances are in great shape for the new addition to your family.
Budgeting for baby
How much does it cost to have a baby? The short answer is: a lot. According to an annual government survey, first-year expenses for a middle-class family in 2008 were more than $11,000. Here’s how to budget for the cost of expanding your family.
- Plan on extra expenses. The biggest additional expense in the first year may be health care. Contact your insurer to clarify any out-of-pocket expenses you may incur for the delivery. Find out the cost of adding your child to your health plan and any co-pay you will owe for those frequent pediatrician visits during the first year. Also prepare for basic baby care costs, such as disposable diapers, baby wipes and infant formula.
- Free up money from your current spending. Start budgeting for a baby today by reducing your current monthly expenses. If you have unpaid credit card bills, make it a priority between now and your due date to pay off your credit card debt.
- Increase income and savings. For some people, a new baby can be an incentive to look for a new job, ask for a raise or promotion. Finding extra part-time work could also increase your income. And now is the time to make sure you have an emergency savings fund.
- Spend smart on your baby. Ask family and friends if they have any changing tables, high chairs, clothes or other items their family has outgrown. (Check that car seats and furniture meet current safety standards).
- Factor in hiring help. Whether it's an occasional babysitter or a full-time nanny, you will likely need some help in caring for your baby. Ask friends what the going rates are in your area. Start setting aside that amount monthly now, in a savings account, to see how it impacts your cash flow.
- Test-drive whether you can afford to take time off. If you decide to have one parent leave full-time work to raise your child, then start living on a single income now. Open a new savings account and deposit the second monthly salary into that account. Then pay all your bills from the single income you’ll soon be relying on.
- Make the right move. If purchasing a home in a child-friendly neighborhood with good public schools is on your to-do list, focus your search on buying a home that will comfortably fit into your new budget. However, if you aren't sure whether you can handle the cost of both a new home and a baby, consider staying in your current home for the time being.
Your new child will change your life and your financial priorities - perhaps in ways you're not expecting - so don't spend this time trying to change everything in your financial life. Focus on budgeting for the first year, and leave longer-term decisions until after the baby comes.
What's next? Create your own savings plan