You’re excited to bring your little bundle of joy home. Although you and your partner are on a euphoria high right now, the reality of the additional expenses may begin to take its toll in the weeks, months and years ahead.
A U.S. Department of Agriculture report states that a middle-income family with a baby born in 2013 can expect to spend an estimated $245,340 during the childrearing years. This figure takes into account food, housing, childcare, education and other expenses. If you live in the urban Northeast, your projected expenses are much higher at $282,480.
The following information about expenses may help prepare your finances before conception, during pregnancy and after your little one is fast asleep in the bassinet.
The First Year Necessities
Your baby’s first year requires a great deal of baby furniture, diapers, wipes, formula and feeding utensils. Your new child will grow quickly and need clothing ranging from newborn onesies to outfits in sizes 12 to 18 months during the first 12 months. You will save money if your baby breastfeeds, but don’t forget about other expenses, such as a breastpump, storage bags, nursing pads and creams.
If you plan to hold a baby shower, then add what you can to your gift registry. Larger baby furniture should be a priority like a crib, bassinet, play yard, highchair, baby swing and car seat/stroller travel system.
Paying for Child Care
Try to make the decision regarding child care as early in the pregnancy as possible. If both parents work or if you are a single parent, you will want to interview potential day care centers or private caretakers before the baby is born. Some centers have a one year or longer waitlist.
Keep in mind the cost of childcare can vary between states as well as counties. In New York, the annual child care cost is $25,844 which is greater than 12 percent of the median income. In California, the annual cost is $22,460. States located within a rural region have lower childcare costs. In West Virginia, the annual cost is $16,120, and it’s even lower in Louisiana at $10,674.
The Importance of a Budget
If you can, set a budget and establish a savings account before conception. If not, consider your expenses and begin saving right away for the first year necessities, child care and possible lack of income. Many businesses do not offer paid maternity leave. According to Ohio’s state laws, for example, expecting mothers can take up to eight weeks of unpaid leave.
For many families, losing an income for six, eight or twelve weeks can lead to a financial disaster as the hospital charges and monthly bills continue to arrive. Creating a budget can help you through this time period — as well as learning to live on 50 percent of your family’s total income.
After reducing excess spending, you may find that one parent can eventually stay home with the new baby part-time or full-time, which will save you on child care costs.
Securing Your Child’s Future With Life Insurance
No one wants to think about suddenly leaving their child without a parent. The reality, though, is this sometimes does happen, and you should financially prepare to secure your child’s future without you in it. Taking out a life insurance policy guarantees your little one will be okay financially.
With a life insurance plan, you can make your partner the beneficiary and/or send the payout to a trust fund for your child. There are different types of life insurance you can purchase in the event of your death to cover the sudden lack of income and funeral expenses.
Term life insurance provides coverage for a length of time. You may choose a 20- or 30-year period while you raise your children and put them through college. Term life insurance is not as expensive as you may imagine, either. A healthy couple in their thirties can each take out a 30-year term life insurance policy for $250,000 at less than $40 per month total.
Permanent life insurance policies last throughout the policyholder’s lifetime. This option is typically used for estate planning and as an asset you can hand down to your children. Check both types of life insurance coverage to confirm you are paying a level premium, so your rates will not increase and you can continue to budget appropriately.
Becoming a parent is a huge responsibility, and by incorporating wise financial decisions with sound advice, you’ll be ready for — almost — anything.