For many of you, crying babies and babbling toddlers are the last things on your mind. If you’re like I was “before child”, when you see a family with a gaggle of kids in line at a store, you pick another register—quick. Been there.
Of course now that I’m a daddy, my 18-month old daughter Molly is my world. But becoming a parent was something I simply could not imagine before it happened. For example, if you’re still childless, you probably regularly experience:
- Sleeping past 7:00 a.m.
- Frequent nights out with friends.
- Sex that isn’t scheduled.
- Quiet time.
- Unstained clothes.
- Extra money in your budget.
Enjoy these things while you can, because once you have a baby, you’ll say goodbye to a lot of freedom, free time, and free cash.
THE HIGH COST OF HAVING A BABY
Not surprisingly, children cost money. Quite a bit of it.
Lots of people have a baby first and ask questions about the cost later. For example: “How will I feed this baby?” But the mere fact that you’re reading this article means you are probably putting some serious thought into the decision to have children.
You want to make sure you’re ready. That you’re with the right partner. That you’re at a good place in your career. That you can provide a good home. That you’re done traveling/job-hopping/being carefree. And that you can afford it.
When you start to look at all those factors, however, you can always find some reason you’re not ready to have kids.
Lauren and I recognized this. After we got married, we decided that there would never be a perfect time to have kids. So we decided to just do it. Nature did its thing, and Molly was born one year and three days after our wedding.
At the risk of oversimplifying the answer to a complex question, I think that if you’re even taking the time to wonder if you’re financially ready to have a baby…you are better prepared than most. Life is short, and for most people, kids are a big part of life. So you should do it.
That said, how much does raising children cost? How much does it cost to have a baby? To raise a baby for a year?
Trying to pin this down is like talking about wedding costs in terms of the average wedding (about $29,000). Some people get married for the cost of the license and a J.P.; others spend six figures. Some parents hire nannies for $180,000 a year.
One thing is for sure, if your budget is already stretched without a baby, adding one to the family will put a strain on your finances. But to help put the cost of having a baby in perspective, here are some of the costs we experienced from the first year and a half of parenthood.
HOW MUCH DOES A BABY COST?: THE FIRST 18 MONTHS
Prenatal care and childbirth expenses. When Lauren was pregnant she was working for the State of Maine, and we were lucky to be covered by her Cadillac health insurance plan. Our out-of-pocket healthcare costs for the entire pregnancy and childbirth totaled only $250. To put in perspective how awesome this was, in 2009 the average cost of a hospital vaginal childbirth without complications in the United States was $9,617, according to Childbirth Connection. Costs escalate if there are complications or the mother requires a cesarean. Even with health insurance, some plans may require you meet your deductible for childbirth expenses, meaning bills of $1,000-$2,000 or more.
A bigger home? What we saved on medical expenses, we made up for by taking on a mortgage payment. On the day we went to the hospital to have Molly, we put an offer on a house. We didn’t need to move because we were having a baby, but we did want more space. Our condo was cramped with just the two of us with little room for a little one to move around. The time was right to buy a home for others reasons, too, so we did. Still, it’s likely that we would not have moved if we didn’t have Molly.
Maternity/paternity leave. It’s no secret that United States employees enjoy far less vacation than our European counterparts; prospective moms might also be horrified to know that U.S. maternity leave policies are among the worst. (In Sweden, by the way, new moms and dads get 16 months paid parental leave.)
Although U.S. law mandates employers give new moms twelve weeks of unpaid maternity leave, many offer just that—the minimum, without pay.
You can plan for this time by saving accrued vacation and sick days, but realize that you may face several weeks or more without the income to which you’re accustomed. You should prepare to limit your expenses during this time or, if you must, prepare to draw on your emergency fund.
All the gear. Babies come with a lot of gear. Here’s a sample of some of the stuff we’ve acquired for just one kid in just 18 months: a crib, a pack-‘n-play, two strollers, four carseats, a Moses basket, several types of bouncy seats, a changing table, a diaper bag, sippy cups and snack traps, bottles and binkies, burp cloths and a Diaper Genie. (That last one keeps your house from smelling like poo and, like printer ink, requires pricey proprietary liners).
Total cost of all this stuff? I’ll venture a guess at about $2,000, but I’m not including clothes and consumables, which we’ll get to.
To be fair, we’re lucky enough to live comfortably and afford luxuries like a second stroller for easier travel and a carseat for each car. Obviously you can get by with less, but I would guess that any new parent is looking at about $500-$1,000 in essential baby gear.
Diapers. This is where things start to get scary for your budget. Brand name diapers cost roughly $0.25 to $0.30 each and you can expect to use between 6 and 10 a day. You can save by buying in bulk and we switched to Target-brand to save more. Still, you’ll spend $40-$50 a month on diapers. (I know some people use cloth diapers which, if you launder them yourselves, can cut out this expense.)
Formula and food. If you think diapers are expensive, wait until we talk about formula. Again, there’s a way around this: mom can breastfeed which is supposed to be better for the baby anyway. Lauren did this for the first few months until she went back to work at which point we began buying formula at a cost of roughly $25 for a can of powder which lasted about a week, give or take. Again, we were able to find a generic brand that Molly liked that cut this figure in half, but our cost was still about $55 a month.
The good news is you only need the stuff for a year or so. Now that Molly eats real food we don’t have to buy formula, but we do buy more food. Kids may be small, but they’re growing; they eat a lot!
Clothes. Babies grow a half-dozen sizes or more in their first couple of years. What’s more, they rarely keep an outfit clean all day. So you’re looking at a lot of clothes. Fortunately it’s easy to save on clothes by asking relatives for hand-me-downs and shopping at widely available kids’ consignment shops. Still, plan to spend a couple hundred dollars a year clothing each child.
Daycare. When you have kids, working parents face an enormous choice: give up one source of income to stay home or continue working and put your baby in daycare. If you will both continue to work and are adding daycare to your budget, prepare for a shock: the cost of full-time childcare can be akin to a mortgage payment. We pay about $1,200 a month, which is high, but daycare costs can get even higher in some states. Still, the alternative can be even more traumatic to your bottom line; unless you’re already in the habit of saving one partner’s entire paycheck, suddenly going from two paychecks to one will take some adjustment.
Baby’s Healthcare. Again, this is where health insurance is oh-so-important. The best plans cover “well visits” for infants. Should your little one have special medical needs, however, you may face more out-of-pocket expenses.
Life and long-term disability insurance. You don’t need life insurance until somebody depends on your income (a non-employed spouse or a child). Should you die, you don’t want your surviving spouse to worry about paying for living and childcare expenses without your income.
Term life insurance is the least expensive and the best choice…you can buy it online or through a local independent insurance agent. A healthy, non-smoking 30-year old should be able to buy a $500,000 30-year term policy for less than $50 a month.
You may also want to purchase long-term disability insurance which can replace a portion of your income if you suffer an injury or illness that prevents you from working. Rates vary based by age, health, occupation, and “elimination period”, how many months you can live off your own savings before benefits kick in.
Babysitters. When you have a kid, dates with your partner and nights out with friends get a heck of a lot more expensive if you have to add a babysitter to the bill. On the other hand, scheduling and paying a babysitter may force you to go out less and help your bottom line. We’ll call this a wash.
And then there’s college! If you think higher education is expensive now, the projected average cost of a four-year college education in 20 years will make your head spin: $89,093 (2009 dollars) for four years according to a New York Times college cost calculator. Assuming 3% inflation, in 2032 dollars, that’s something like $161,000. So for anybody who wants to foot the entire tuition bill for a baby born today, that means saving at least $300 a month every month for the next 22 years and hoping for at least a 7 percent annual return.
SO, YOU STILL WANT A BABY?
Don’t let this scare you. Yes, the cost of having a baby adds up. And although nothing can prepare you for the challenges and joys of becoming a parent, you can prepare financially. Essentially, that means having something set aside and making room in your budget for new expenses. If you want kids, you don’t have to put them off until you’ve banked $100 grand. But having a stable income, health insurance, emergency savings, and room in your budget for diapers will help you spend less time worrying about money and more time enjoying your new family.
What about you? If you’re a parent, how has it changed your finances? If you’re trying to plan financially for kids, what worries you?