How to Budget for a New Baby
Having a baby is one of the most joyous and exciting events that could ever happen to you! It’s also a little financially scary, and maybe even an emotionally scary time in your life. Babies cost a lot of money and everyone knows that. They have many needs that need to be met.
So, how can you prepare your budget for all of the expenses that come with having a baby? How much money can you expect to spend on your little one in the first year? We’re going to answer these questions and many more. We want you to be as prepared as possible for the arrival of your newborn.
Here’s some advice on how to budget for a new baby:
- Make sure you have good health insurance – You should plan for out-of-pocket pregnancy, childbirth, and first-year expenses. The average cost for routine maternity care (prenatal care, labor, delivery, and post-partum) is around $7,500. Of that amount, $7,000 was usually paid by health insurance. With a cesarean delivery, the average was $10,500, $10,000 of which is typically paid by insurance. Review your health insurance policy to find out how much you have to pay out of pocket for prenatal care, the hospital stay, tests, and post-partum care.
- Create a post-baby realistic budget – Use a free online budgeting tool such as onlinebudgetadvisor.com or www.mint.com to help set up a budget. Disposable diaper costs alone can be around $850 for the first 12 months. Baby formula is even more expensive than that. Figure out what other costs to expect with the First-Year Baby Costs Calculator from Baby Center. It’s a very useful free tool to help you come up with estimated costs to help you create a budget.
- Figure out the childcare situation ASAP – Daycare is often the biggest line item, with the average cost being somewhere around $4,500 to $18,500 a year depending on your location, age of the baby, how many hours, and a few other factors. If one parent is going to stay home, you must account not just for loss of pay, but also for loss of job-related perks such as 401(k) match. It’s a very important discussion to have with your partner because either way there’s a lot of money going right out the door.
- Must-have list – Babies need a lot of things, but some things are not that necessary, i.e. a wipe warmer. There are some things you’ll definitely want to purchase or put on your baby registry. Some of these include: stroller, crib, infant or convertible car seat, diaper bag, pack-n-play or portable playpen, bottles, wipes, diapers, baby monitor, and clothes. All of these things add up quickly and could put you into debt if you aren’t careful. Watch your spending very closely.
- Take advantage of consignment sales and thrift stores – Babies grow really quickly! Instead of paying full price for their clothing, check out gently used and even brand new items at your local consignment shop or thrift store. Many stores will also buy back items after your child has outgrown them for cash or store credit. Be cautious about buying used items related to your child’s safety, such as a crib or car seat because these items can have recalls for safety issues. A few times a year, several stores or organizations will have huge consignment sales that pop up in different locations. These sales are great places to find items you may need in the future as well as clothing for your little one.
- Borrow clothes and other items from friends with kids – Because kids grow so fast and tend to get clothes dirty or rip them, it’s a great idea to ask for hand-me-downs from your friends that already have children. With babies comes a ton of clutter and messes. Your friends and family will be more than happy to give you clothes, swings, pack-n-plays, and maybe even big ticket items such as cribs, strollers, and more. Don’t be afraid to ask and always graciously accept any hand-me-downs or gifts from your loved ones.
- Tax break for having a baby – The birth of a child is not just a blessed event; it’s the beginning of a whole new set of tax breaks for your family. You’ll have to get a social security number for your baby to claim them as a dependent on your tax return. Failing to report the number for each dependent can trigger a $50 fine and tie up your refund until things are straightened out. Usually, 20% to 35% of child care expenses can be deducted depending on your income. Some states offer additional benefits, so check with your tax adviser.
- Use free samples and coupon as much as possible – Many manufacturers give hospitals samples, coupons, and freebies for new parents. Before you come home, ask the nurses or hospital staff if they have any available. If you sign up for a few baby basics classes at local organizations or a pediatrician’s office you might receive free things such as formula, baby wash, baby lotion, etc. Also, if you create a baby registry at Target.com and bring the print out to their customer service desk, you’ll receive free samples and coupons.
- Buy diapers and wipes in bulk – One of the most expensive necessities for any baby is diapers and wipes. Simply because they go through so many of them. If you aren’t a fan of cloth diapers and definitely know you want to do disposable diapers, then it’s a good idea to buy those diapers in bulk at big stock stores like Sam’s Club, Costco’s, etc. or buy them in bulk online with free shipping. Your cost per diaper is cheaper when you buy in bulk. And you’ll go through them so quickly the first year that buying in bulk will also save you time and gas by not having to run to the store so often to replenish them.
- Make your own baby food – Not only is making your own baby food cost effective, it can also be healthier for baby. You know exactly what’s going into that baby food because you’re the one making it. There are no artificial dyes, sweeteners, preservatives, etc. Get a small food processor and make your own baby food from fresh fruits and vegetables. It’s a lot cheaper and healthier than most baby food found in the grocery store. Just be sure to freeze any leftovers so they don’t spoil. Here’s a great website to help you make your own baby food: http://wholesomebabyfood.momtastic.com/
Your baby’s first year of life is a very exciting time, but also pretty expensive. So make a budget, investigate your options to keep costs within reach, and spend more time enjoying your little one than worrying about how to pay the bills. It just takes a little planning, researching, deal grabbing, and a frugal mindset to make it all work.
Do you have any other money-saving tips for first-time parents or soon-to-be new parents? We’d love to hear from you!