So what does it mean to be ready financially for a child? Here are a few steps I’ve thrown together to help you think it through:
What it Costs to Have a Baby
I think most of us are pretty clueless when it comes to how a baby will affect our finances. The numbers are pretty daunting when you first see them:
“Childbirth and prenatal health care cost averaged $7,090 for normal delivery in the US… [The] US Department of Agriculture estimates that a US family will spend an average of $11,000 to $23,000 per year for the first 17 years of child’s life on a child born in 2007.” – wikipedia
I feel like those numbers are a bit high. Still, you’ve got to put some stock in them and realize that it’s worth your time to think about how much having a baby will cost you.
Pre-Labor and Delivery
Let’s look at some ways to get a good understanding of what it might actually cost you to go to all those doctor visits and to deliver your baby in a hospital:
Ask Your Friends, Co-workers, and Family – I’d start by asking a co-worker who recently had a baby. They’re more likely to have used your work’s health care plan and your local hospital. They can give you a good idea of what they had to pay out of pocket for the delivery.
Examine Your Health Care Coverage – Take an evening to understand exactly what your current health care plan will cover. You might be able to switch to a more beneficial plan, reducing your overall out of pocket expenses for the pregnancy and delivery. We’ve currently moved to our premium plan while we’re expecting and will re-evaluate plans soon now that our child is born.
Call the Doctor’s Office – If you already know what doctor you’ll likely be using for the delivery, place a call to his/her office and ask for a cost estimate for all the pre-labor visits and the actual delivery. They may even be able to give you an estimate based on your current insurance.
The First Year
Next, you should examine what the first year of your baby’s life will cost you. There are a lot of things to consider here. I’m not going to try and list them all, but I will refer you to a handy tool that helped me:
Use the Calculator at Baby Center – The baby cost calculator at BabyCenter.com is an all-encompassing tool for helping you estimate what it might cost you to have a baby and take care of them in the first year. The calculator considers the basic equipment and supplies and even factors in child care and loss of one income.
Take Action to Prepare for a Baby
Now that you’ve got a feel for what it costs to deliver and raise a kid for the first year, you need to take steps to prepare your finances. Here are some ideas:
Start Saving Up – A good place to start is to make sure you have enough money saved up so that you don’t have to go into debt as a result of delivery and first year costs. Make it your goal to save up your total estimated amount by the time your baby is born. If that’s too aggressive for you then shoot for the delivery costs and half of your first year expenses.
If you’re about to start trying to get pregnant, simply divide your total estimate by 10 months, and begin setting that much aside in a savings account every month. If you’re already expecting, just use the number of months you have left. Lastly, you need a place to put your savings. If you haven’t already, you should try a high-yield savings account.
Get Rid of the Excess Debts – Bringing a child into this world gives you the opportunity to press the reset button on your life somewhat. Take advantage of this change and plan to get rid of that nagging credit card debt or student loan payment. Use this nine months to knock it out and be ready to start a debt-free life with your new baby. This will make you feel better and it will free up room in your budget for these extra expenses.
Final Thoughts on Babies and Finances
The wonderful thing about preparing for a baby is that we have nine months to do it. So, even if your child wasn’t planned out perfectly on the calendar, there’s still time to get your financial act together. Take time to understand what your financial needs will be and then take action to prepare yourself.
Another version of this post was originally published at Bargaineering.com.
Photo by Kevin N. Murphy
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I’m extremely blessed to have excellent health insurance. While it cost $10,500 for all prenatal care + delivery, we paid less than $300 out of our own pockets.
Since my baby is not yet four months old, I can’t say for sure how much it will cost once he’s older. But so far, he hasn’t cost much of anything.
Thanks to tax credits, it seems we’re financially breaking even so far.
I’m glad that we don’t have much debt and have money in savings. This will allow us to continue to provide for our son and future children.
Having a baby is like buying diamonds…if you have to ask how much it costs, you probably can’t afford it.
I know a lot of people with children. Every one of them says that they had no idea that children would turn out to be so expensive. One chum has four kids under five-years-old and he’s aged about twenty years in the past two. He’s ALWAYS complaining about (a lack of) money.
Great post and just in time..well not really..my wife is due in May so we dont have time to do some of the suggested but we already did some of them! Insurance/no Insurance changes everything too
People that have kids never look at it financially, they get emotionally attached and do stupid things and end up struggling for years.
“People that have kids never look at it financially, they get emotionally attached and do stupid things and end up struggling for years.”
Having kids was the single best financial move I ever made. Their presence made me rethink things and get my act together. With a one and a three year old at home, I’m now in the best financial shape of my life.
Thanks for this timely article. I just recently got married, and I’m looking for ways to be smart about money in the future, especially when it comes to children.
It kind of sucks how money can determine how a baby is raised, or if you should even have one or not, but that’s the reality, and it’s important to understand. Thanks again!
I think it’s the Darwinian instinct to pass on one’s genes that drives people to have babies. I’m sure many just so – “oh, it will all work out,” or “God will provide.” There’s many religions that frown on using birth control, and families are huge!
I think you should have to take classes and pass a test to have children. And part of passing the test should be that you can afford these kids!
For me having children was a given, so I prepared for it financially just as I prepared for my own needs. Children do not have to cost a lot. I had great insurance so we spent under $1000 for our delivery. Tax credits and deductions help. Craigslist and children’s consignment sales are great ways to get baby gear, clothes, and toys for very little money. Parks and libraries can take the place of expensive classes. The possibilities are endless.
One cost you didn’t mention, however, is the cost of “trying” to have a baby. For people with fertility problems, this cost can be in the thousands! Nice post.
At first I thought the numbers sounded inflated until I did a quick summary of what I pay each year (my child is 5 years old):
daycare 7200
ballet/swim lessons 600
college savings 300
clothing 500
food 720
bday parties 190
healthcare 1716
dental 360
Xmas, easter, 150
Annual Total 11736
I consider myself very frugal, especially when it comes to food and clothing and it didn’t take long to add up to almost $12,000 and I’m sure I’m missing a lot!
After the birth of our first, we have decided that when we get pregnant with #2 (or start trying) we will save up the max out of pocket amount for our health insurance. Even though we didn’t max out the whole family with #1, we figure its a good idea to be prepared in case additional health care is needed.
As for the loss of income, we went to one income after #1 and it was really hard. We were fine for the first few months, but after a while the additional money we had on hand was gone and we realized how poor we really were. So I totally agree that its a great idea to save up money for the first year. You never realize how expensive things like diapers and formula are until you shell out the cash.
You don’t take one penny with you when you die. Children are a blessing. I recommend being as generous as you are able with your children while you are raising them and as they begin their independent life as young adults. I sent my 5 children to parochial schools, which used up a lot of our budget, but it was one of the best decisions I ever made in my life. My husband and I also help out our young adult children with the downpayment on their first home, not completely giving them the downpayment but giving them a good portion of what they need. This allows them to purchase their first home faster. Just a few suggestions from a mother who has “been there, done that”.