According to a recent survey conducted by Intuit, makers of TurboTax, QuickBooks and Mint, a whopping 55% of Americans don’t feel confident in their ability to manage their finances. What’s more, 64% of people surveyed cite being able to provide for their family as a sign of a prosperous life. This got us thinking: What do you have to account for when you’ve got a baby on the way? We’ve outlined the costs you can expect in the first year of parenthood, so you’re armed with info to help you budget.
Diapers, Clothes and Other Recurring Costs
The average baby requires 2,500 diapers in the first year—that means you’re spending as much as $850 right out of the gate. Other essential recurring costs: formula or pumping supplies, clothes, toys, books, groceries (when the baby starts solids) and baby gear. (Mamaroo, anyone?) To set up and stick to a budget, rely on an app like Mint to track and see all of your baby-related spending. The “Budgets” tab will analyze your overall spending across categories and, after a few months, you’ll be able to see where you have a surplus month over month—and where you need to cut back in order to better save. (Hey, you can always snag that Mamaroo secondhand.)
Now’s the time to get on the phone with your insurance provider to find out exactly how adding a child to your plan will affect your premium, copays and deductibles. This will give you a chance to do the math and, if needed, explore other options, like ACA plans. Once you’ve settled on a plan, make sure your preferred pediatrician participates and find out if you can expect to incur any other costs by choosing them.
Spoiler alert: This is one of the biggest kid-having expenditures. (According to Care.com, one in three families now spends 20% or more of their annual income on childcare, with an average weekly cost of $211 for day care and $580 for a nanny, as of 2018.) Get a jump start by touring day care centers and talking to other parents about going rates. (Local mom groups on Facebook are a quick way to get a gut check on pricing where you live.) Then use an online budget calculator—like this one for childcare—to calculate the annual expense. Sound daunting? There are creative work-arounds to help you save. For example, you could explore a nanny share (where two families pay a higher hourly rate for care but split the cost) or pause on your 401(k) contributions for a year or two (ask your financial planner about this, of course). You can also use a program like TurboTax to strategize about potential tax credits and figure out how to maximize your FSA.
It’s never too early to set up a 529 college savings plan (a tax-advantaged savings account for higher education). Why do it now? Well, first of all, having it established will help you remember to make monthly contributions—use a college cost calculator like this one from the U.S. Department of Education to figure out how much to set aside. Secondly, once your 529 plan is activated, you can direct family and friends to make cash donations in lieu of other gifts.
Diapers are important—but so is a budget line for a regular date night. (Netflix is great and all, but sometimes you’ve got to go out…even if it’s just down the block.) Figure out how much a night out will run you (the average cost of a sitter is $17 per hour, according to UrbanSitter),then set aside a slush fund for after the baby arrives. Maybe it’s $1,000 so you can have ten dates over the course of the year. Maybe it’s $70 you put in a jar for a rainy day when you really need a little grown-up time. A solid investment if ever there was one.