Can You Afford a Baby?

Can You Afford a Baby?The story is always the same.

You’re married for a few years and your parents eventually ask the question: “So when are we going to get a grandchild?”

My response was, “When we can afford one.” And the quick comeback was always, “Oh honey, you can never really afford one, so there’s no reason to wait.”

Granted, most grandparents-in-waiting aren’t being objective when it comes to the question of being financially ready for children. But to better understand what being financially prepared for a new child actually implies, you would do well to read through the following advice.

The True Cost of a Baby

Like many pre-child couples out there, my wife and I were basically ignorant about the overall cost of the birthing process and the yearly expenses associated with a new child.

Not only that, but we were really unprepared about how much a baby would affect our overall financial situation.

“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

On the surface, these amounts seem a little high. But after 3 years into parenthood, I can tell you that it’s not that far off. Sure, it varies by state, by hospital, and by personal preferences. But the time and effort you put into researching new-baby costs (immediate, monthly, and yearly) will be greatly rewarded.

Before Labor and Before Delivery

The costs associated with pregnancy and with the delivery process aren’t some big secret, you just need to know where to look and who to ask. So how do you find out?

Ask the People You Work With and and Family/Friends – the best place to find out about pregnancy and delivery costs are from people in your life who have recently had a child. Those who live in and around your community probably have a wealth of knowledge when it comes to local hospital and doctor fees.

And think about this, a fellow employee who has a new baby can be a great source information about your employer’s health care coverage. It will help you plan and prepare if you get a good estimate about your out-of-pocket expenses.

Study Your Current Health Insurance Coverage – The time you take to study up on your health care coverage will be very beneficial. No one likes surprises when it comes to medical bills. Although it might not be exciting, take some time to fully read and understand the charges and percentages that your insurance provider will cover.

My wife and I were allowed to switch our coverage plan after 2 months into her pregnancy. The new plan was more beneficial to our new situation, helping to lower the deductible and increasing the amount that would be covered. Of course, you should check with your provider before you attempt any such transition.

Call a Doctor – Don’t be intimidate about asking your doctor to give you an estimated cost of pre-labor office visits, hospital charges, and the delivery procedure. Bring a copy of your insurance, and the office assistant should give you a more detailed estimate specific to your coverage.

How Much Does a Baby Cost in the First Year

After nailing down preparation for pre-labor and deliver/hospital costs, you should consider examining the amount of money needed to get through your baby’s first year. Believe it or not, there are plenty of tools to help you get through this.

Baby Center Calculator – One of the best tools that I’ve found for approximating year-one costs is the cost calculator at BabyCenter.com. This tool takes into account items such as basic baby necessities (like beds, clothes, bottles, etc.) and even short-term or long-term income loss.

To Be Ready for a Baby, Take Action

You’ve put in the research time and developed a good estimate of costs associated with your new baby. It’s time to strategize about your finances.

Save Up – One of the best ways to prepare your finances for a new child is to save up enough money so that the pregnancy and delivery don’t drag you into debt. Take your total cost estimate from conception to year one and set a goal to achieve that amount.

Depending on your current income and financial situation, if that goal is too lofty, at least try to save up for the estimate pertaining to the delivery and doctor’s visits.

You can start by dividing your total estimated costs by 10 whole months and save that amount each month as you approach delivery. If you’re already pregnant, simply divide the estimate by the # of whole months there is until your due date. Online savings accounts are great for this type of planning.

Reduce Your Excess Debt – Expecting a new child gives you a chance to re-prioritize your life and your expenses. Eliminating debt on your credit cards and student loan debt will allow you to breathe a little easier during this time of joy. How great would it be to start your new life with a new little one by living debt free?

9 Expert Tips for Preparing for a Baby

Kimberly Palmer, author of Generation Earn: The Young Professional’ s Guide to Spending, Investing, and Giving Back and the Alpha Consumer blog at USNews.com shares nine more tips for preparing for a baby.

Thinking about becoming a parent? Most of that decision has nothing to do with money, but getting financially prepared can make welcoming a newborn into your home a little less stressful. You’ll still have to learn how to cope with sleep deprivation and diapers, but can worry a little less about affording it all.

The Waiting Game – Wait until after the birth to purchase toys and gadgets (such as an Exersaucer or Jumperoo) that aren’t usually used until babies move past the newborn phase. You might find that your baby likes only certain kinds of toys, or doesn’t like to be constricted in certain contraptions. By waiting, you’ll be sure to only buy things that you actually use.

Friends and Family Plan – Borrow as much as possible from other parents, including used maternity clothes and baby gear. Your friends might be glad to put their items to good use, and you can pass on the favor when you’ re all done.

Just make sure the product hasn’t been recalled. The Consumer Product Safety Commission has recalled a slew of products recently, from sleep positioners to cribs to infant slings. In fact, the commission recommends against using drop-side cribs altogether, so spring for new purchases whenever safety is a concern.

Community Trust - Sign up for your local community email group through freecycle.org or use craigslist.org to pick up used items from other parents in your area. Tips for finding discounts can also be found at babycheapskate.com.

Work Affects – Familiarize yourself with your workplace’s maternity and paternity leave policies. Some people are shocked to discover than instead of the two-month paid leave they had planned, they’ ll be forced to take unpaid leave. Federal law doesn’t require employers to provide any paid leave at all.

Health Matters – Find out what it would cost to add an additional dependent to your health insurance. You might need to plan ahead to afford those extra payments.

The 10K Mark – Before the baby arrives, save at least $10,000 for baby-related expenses during the first year. It sounds like a lot, but can make it easier to absorb all those extra costs.

Practice Makes Perfect – Practice living on $1,000 less each month, which is the average cost of child care. Or, if either you or your spouse plans to stay home, practice living without that second income.

Think Big (or Not) – Anticipate any major purchases, such as a new home or new car, that you will need to make before welcoming home a new member of the family. But don’ t feel pressured to live in a bigger home; plenty of families turn small apartments into a cozy and welcoming family spaces.

Where There’s a Will – Update (or create) your will and life insurance benefits. It’s no fun to talk about, but important to guarantee the financial security of your family. Check out these other money moves to make when you have a baby.

My Final Thoughts

Remember, you have 9 months to prepare for your new bundle of joy. Don’t worry if you didn’t start early enough. Focus on becoming financially fit from this point forward. Take the time, do the work, and reap the benefits of financial preparation.



Last Edited: April 22, 2013 @ 1:02 pm
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

Comments

  1. 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.

  2. 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.

  3. 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

  4. People that have kids never look at it financially, they get emotionally attached and do stupid things and end up struggling for years.

  5. “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.

  6. 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!

  7. Greener Pastures says:

    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!

  8. 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.

  9. Golfing Girl says:

    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!

  10. 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.

  11. Marilyn Rittmeyer says:

    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”.

  12. Besides the healthcare/birth costs, as you keenly pointed out, we found that our 1st year of costs for the new baby to be nearly zero.  
     
    We got all of our clothing from acquaintances (none of our friends had babies yet) – they were happy to give stuff away!  Craigslist is FULL of baby stuff for nearly free.  We used cloth diapers and later sold them at almost the same cost we purchased them for.  We didn’t buy a bunch of furniture (dresser, changing table, specialized baby stuff), although we did get a used crib from Craigslist when our son was about 6 months for $100, that we later sold for $100.  We received gifts from family/friends that we later donated, sold, or re-gifted to expectant parents.  Honestly, if you really stick with what you really, truly NEED, then the cost can be quite minimal.  Babies in their first year hardly need anything.
     
    Of course, in the US, you don’t get a year off work like you do in some other countries, so the cost of daycare can be quite high.  But, if you can avoid that by having one parent at home (or a family member if that’s possible), then the cost of a child doesn’t have to be high.
     
    Our child is 6 now and we still hardly spend any money on him.  The emotional aspects to providing for a child are obviously really high and advertisers will certainly prey on that with all the supposed things your child needs.  But, if you give your child the gift of your own time, then that is the greatest gift of all.

  13. Go_Courtnay says:

    I can’t believe how much it is just to deliver a baby! I had no idea – we will most likely be baby free for a few more years to save up! :) 

  14. AverageJoeMoney says:

    Great tips, PT. I’d also recommend trying to calculate the extra monthly costs you’ll incur and saving those for a few months into a savings account just to simulate the cost difference. You’ll have more money in savings at the end and know if you can’t afford all the extra expenses that baby will bring.

  15. David Ruetten says:

    Yeah, don’t get married and have kids unless you have lots of money and a really good job for at least thirty years.

  16. People can have a baby on practically any budget.  If you have a lot of money and can afford to “spoil” your children then fine, but if you have less income there is nothing wrong with getting financial help from agencies in your community.  Kids don’t need a ton of toys to entertain themselves.  If they have parents who are willing to spend time with them that’s all they really want.  Besides diapers and wipes I didn’t really pay for much my kid’s first year.  we bought new clothes every few months(from the goodwill.)  As babies get older there are more toys(if you want to buy them.)and  lessons of all kinds to put your kids in but, it’s not necessarily.  As far as doctor and labor coast I paid nothing.  I was on state insurance and they paid for everything.  We also have a program called W.I.C (women, infants, and children.)  They give out vouchers to pregnant moms for different foods and once the bay is born they give out vouchers for formula and baby food(once the baby is 6 moths old)  after a year of age they give out more foods and cows milk.  a great program.  You can make a decent amount of money and still get to be part of this program.  It’s not just for the “dirt poor people.”  Children are a blessing from God and no matter what time of our lives we are blessed with kids we can do it.  God never gives us more than we can handle. 

    • HeatherWilliams1 says:

      I think it’s morally wrong to not use birth control if you can’t afford to care for a child without government assistance. That money is for people who have unforeseen circumstances after the children are already there. No one should plan to bring a life into the world knowing that tax payers are going to have to provide for them. You have an obligation to provide for your own children. 

    • HeatherWilliams1 says:

      I think it’s morally wrong to not use birth control if you can’t afford to care for a child without government assistance. That money is for people who have unforeseen circumstances after the children are already there. No one should plan to bring a life into the world knowing that tax payers are going to have to provide for them. You have an obligation to provide for your own children. 

      • rachel_forshee says:

        @HeatherWilliams1 It is morally wrong to take help when it is given? It is morally wrong to need help? Only the wealthy should have children? Is this really what you’re saying?

    • HeatherWilliams1 says:

      I think it’s morally wrong to not use birth control if you can’t afford to care for a child without government assistance. That money is for people who have unforeseen circumstances after the children are already there. No one should plan to bring a life into the world knowing that tax payers are going to have to provide for them. You have an obligation to provide for your own children. 

    • HeatherWilliams1 says:

      I think it’s morally wrong to not use birth control if you can’t afford to care for a child without government assistance. That money is for people who have unforeseen circumstances after the children are already there. No one should plan to bring a life into the world knowing that tax payers are going to have to provide for them. You have an obligation to provide for your own children. 

  17. Jennifer Scott Spencer says:

    Daycare costs as much per month as our rent. I knew it was coming, and we budgeted for it, but my it’s startling when it really happens. Actually, that’s true of the entire parenting experience so far.

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  19. I deal with many high net worth individuals. The majority of the people I see don’t have kids. The ones that do have kids, typically don’t have as much money. I’m not saying don’t have kids if you want to be rich, but people do underestimate how much kids cost. And the price goes up as they get older.

  20. HeatherWilliams1 says:

    mom to mom sales are also a good resource. i don’t have kids but i used to own a daycare and i got so much for an unbelievably low price

  21. HeatherWilliams1 says:

    mom to mom sales are also a good resource. i don’t have kids but i used to own a daycare and i got so much for an unbelievably low price

  22. As my husband always says, children cost exactly how much money you have.  LOL

  23. As my husband always says, children cost exactly how much money you have.  LOL