Parenthood is a life changing event. New parents suddenly find themselves focusing on the needs of their baby instead of only taking care of their own wants and needs. While having your very own “bundle of joy” can be the most rewarding experience, being a parent can also be financially challenging as raising kids is expensive. Here is some advice to help future and current parents to prepare for the cost of raising children.
Talk to a parent of a teenager, perhaps your own parents, for a few minutes and the conversation might soon turn into how expensive it is to raise children and how they are pinching every penny to pay for college and purchasing a car for their 16th birthday as soon as possible. The U.S. Department of Agriculture projects the average middle-class family will spend $245,340 to raise a child. As there are so many different expenses that factor into that estimate some families will spend significantly less while other households will spend noticeable more. The following are some of the most expensive costs of raising a child.
The First Year
While any year can be expensive to raise a child, the first year can be the most expensive. Especially for first-time parents. The largest cost that every family might encounter is the actual process of delivering the baby. The hospital expenses and prenatal care, before insurance benefits, can cost $10,000. Depending on your insurance plan, you might only have to a few hundred dollars up to $3,000 in out-of-pocket expenses.
The costs can also be higher for first-time parents because of they do not own baby items yet like a crib, clothing, car seat, diapers, toys, or additional nursery items. These one-time costs can easily cost at least $2,000. Having a baby shower can greatly help reduce these costs as many family members and friends are usually more than excited to help express their excitement for the baby. Using a baby cost calculator will help you project how much money you will need to set aside for the first year and potentially provide several baby registry ideas simultaneously.
The largest ongoing cost for working parents can be daycare. Approximately 61% of children spend at least one day in daycare each week and the average national cost is $11,666 per year for center-based care. This cost will vary depending on your local cost of living, daycare in New York City will be more expensive than Iowa, and different types of child care like center-based or individual nannies can be more or less expensive than other care types.
As child care might be the most expensive recurring baby budget item, it’s not uncommon for one parent to transition to part-time employment or stays at home. The reason for this is one parent’s paycheck might go directly from their employer to the care provider. For other families, it is more cost-effective to leave the workforce for several years because full-time child care can be so expensive.
Formula & Food
Another recurring expense is formula and solid food. Breastfeeding is the cheapest option, but it isn’t always a possibility. As the baby needs to eat, you will need to stock up on formula and once the baby is six months old, it is recommended to introduce solid foods. Budgeting $100 per month ($1,200 annually) for formula is a fair projection for most babies. Once they begin eating solids, the costs might increase $60 per month if they do not eat the same food as their parents.
Until a baby is potty-trained, they will need their diaper changed several times daily. Disposable diapers will cost approximately $1,000 per year. Going with a store brand or choosing cloth can help reduce that cost, but, you will need to pay attention to what diaper best fits your baby to maximize their comfort and hygiene.
Once your child gets a few years older, you might also think about enrolling them in a youth sport like tee ball or soccer. Whether it is sports, ballet, or music lessons, extra activities cost money. Some families can spend as much as 10% of their income on youth sports, especially if they belong to a traveling team. But, it’s also possible to only spend $200 or $300 per year for non-competitive leagues where the focus is more on having fun and teaching sportsmanship instead of trying to develop the next Babe Ruth or Aaron Rodgers.
Saving for College
It is never too early to start saving for college. With the average 2016 college graduate owing $37,000 in student loans, the cost of college is more likely to increase in cost instead of decreasing. Current projections predict today’s babies will owe $77,000 when they earn their college degree. The best way to save is with a 529 college savings plan that allows parents to invest up to $14,000 annually tax-free. As college is a future expense and you might have a limited income today, focusing on the immediate baby expenses might be more pertinent. But, if you or other family members are looking to make a gift that your child can use for years to come, a donation to their college fund can be very valuable.
It’s no secret that having a baby can be expensive even before you take them home from the hospital for the first time. Because of the expenses required to start a family, approximately 19% of Millennials delay parenthood because of debt like student loan payments. Raising a child is expensive, especially if you will require daycare, and money that used to be spent going out with friends or taking a trip is spent on diapers, formula, or savings for future costs instead. But, many costs are controllable and raising children can be as expensive as a parent makes it. Saving to have a baby is a good idea, but, certain future expenses like braces and college will need to be saved for along the way.