Babies are cute (hot take, I know). They’re adorable, they smell good, they’re loving. All true. Here’s one last superlative for you: expensive. Babies are really, really expensive.
There’s a lot on this topic, so much in fact that I may just write a book on it (wink wink), but, for our purposes here today, I’m only going to talk about what to financially expect when you’re expecting. My advice is different if you’re a few years away from having kids, if you’re considering freezing your eggs, or trying IVF.
I’ll get to all of that in future articles. But today, I’m going to be talking to the people who are expecting expecting. As in – you have a due date, or an adoption date– some day marked on your calendar where you will have a new roomie in a freshly baby-proofed home.
Babies are tiny and cute, and yet there’s nothing tiny and cute about the way a mini-me will affect your spending plan. Some estimates put the annual cost of having a child around $10,000, while others put it as high as $17,000.
Of course, there are a bunch of factors that affect how much people spend on their kids: where they live, whether they’re raising a kid with a partner, whether their baby has a medical condition, and how many kids they have, to name a few.
However, if you average out all of these factors, the USDA finds that parents are spending around $200,000 for the first 17 years of their child’s life. And that doesn’t include the cost of actually giving birth, or the potential cost of college.
Here are 6 Things You Should Do When You’re Expecting:
If Your Health Insurance Doesn’t Rock, Kick it To the Curb. Some health insurance plans are much more baby-friendly than others. Some plans cover immunizations, copays and coinsurance fees, while others don’t. Some plans even cover more granular costs. For example, the Affordable Care Act requires some insurance plans to cover breastfeeding support (like a counselor) and breast pumps. So ask yourself: does your health insurance plan have you covered? If not, it’s time to switch. Typically you can only change insurance plans during the “open enrollment” period, unless there is a “qualified life event” that warrants a change. Having a baby does meet that criteria, so you don’t have to wait until open enrollment to glow-up your health insurance plan.
Claim a Child Tax Benefit. You will have increased costs when you’re a parent. That’s just a fact. But, you will have a new opportunity to get some tax love. Don’t forget to claim a child tax benefit when you file!
Put Your Wallet Down. I’m sure your to-do list is a mile long and you want to make your home cozy for your little one, but hold off on buying new swag. Strollers, cribs, car seats? You can buy all of those things used, or even rent them! And for the love of god, don’t break the bank on toys. If you have friends who have blazed the baby trail for you, bring your kiddo over to their house and see what kind of toy your baby gravitates towards. Otherwise, you may stock up on bouncy balls only to discover that your baby likes stuffed animals… You don’t know until you know.
Make Friends. You’ll benefit a ton from finding a group of parents to connect with. To find your squad, you can try the app Meetup, or see if your doctor knows of any local organizations. These new pals may have hand-me-downs you can borrow – plus, you may be able to go splitsies on babysitters. Childcare is a huge cost – so if you can coordinate with another fam, do it!
Set Up a 529 Plan. 529 plans are special investment accounts designed to help guardians afford educational costs for their kids. The most popular kind of 529 plan is the savings plan. With a savings plan, you pay tax on what you contribute (like a Roth IRA) but withdrawals are tax-free if they’re used for qualified education expenses like tuition, room and board, and so on. Plus, in some states, you might be eligible to deduct your contribution from your state taxes. Tax-advantaged accounts are almost always the move – but especially when it comes to college, which is SO expensive and a looming student debt crisis? Do this ASAP.
Call Uncle Sam. While the U.S. is not very progressive relative to other countries when it comes to parental support, there is some out there. You can find your state’s resources here.
If you’re expecting, it’s time to revisit your spending plan. You’re probably going to need to take some of that 15% in your extras fund and move it over to what you’ve been allocating for your endgame. It doesn’t mean that you should stop putting aside energy for self-care and the things in your life that bring you joy. But see if you can swap out some of your pricier routines with free-99 adventures. Maybe instead of going to drinks with your friends, you could go to the park, or the beach, somewhere where you can get some (well deserved) R&R without breaking the bank.
Money News Network is the premier podcast-driven financial news and information destination. We create content that cuts through the typical Wall Street jargon to help inform, empower and inspire you on your money journey.