Your bundle of joy also comes with a bundle of bills. The U.S. Department of Agriculture’s report is enough to give any new parent serious sticker shock: On average, they estimate a middle-class family will spend over $233,000 raising their baby from birth to age 18. Getting your finances in order is an important part of planning for your new arrival.
Immediate Baby Expenses
The best time to start saving for a baby? As early as possible. Saving up 3 to 6 months of emergency savings is wise even before you start trying to have a baby. In the absence of a time machine, make a plan to budget for baby as soon as you know you’re expecting.
Two kinds of expenses are your first priorities. One is your budget for baby supplies. Babies don’t need much, but they do need some special equipment. Some basic essentials include:
- Diapers and wipes
- Car seat
- Crib or bassinet, with mattress and sheets
- Baby carrier (wearable or stroller)
- Safe, stable surface to change the baby
That’s basically it. Everything else can wait. In a pinch, even the stroller can wait until a few weeks after baby’s born (possibly even longer, if the weather’s bad). Buy those essentials first, and deal with any additional purchases when it makes sense for your budget.
The other important expense to factor in is maternity or paternity leave. The U.S. doesn’t mandate paid family leave, and you’ll need some time to recover after giving birth. If your partner will take leave as well, you need to plan for a period of time when there will be no income.
If you can save 50% of your monthly budget every month for 6 months of your pregnancy, you’ll save 3 months of living expenses to use during maternity leave. If you can save 25%, plan for 6 weeks of leave. You may need to adjust your maternity leave expectations or see if you or a partner can take on additional shifts to meet savings goals.
One recommendation: Think carefully about moving if you don’t have to. Many new parents assume they need more space, but you have more time than you think. A baby can get along just fine in a small apartment until you have a chance to save.
College and Daycare
Saving during pregnancy is also a way to prepare for how your income or budget will change. In some cases, the pregnant woman may have stayed home even before the pregnancy. A working parent might be lucky enough to have family who are able and willing to take on 40 hours or more of weekly childcare. In many cases, though, new parents face a choice of having one parent leave work to stay home, or place their infant in (often expensive) daycare.
This new expense is a big adjustment. Saving the amount of a daycare bill during pregnancy is one way of preparing for family leave. It also serves as a test run to learn where to make changes in your budget, before the money really does need to come out of the bank. If one parent is planning to stay home, review your finances carefully to plan how you’ll manage on one salary. It might be worthwhile to research ways to earn supplemental income at home.
On top of it all, there’s college expenses to consider! Don’t panic. Yes, it’s smart to save for college early so investments can grow. You do also have 18 years. Make a plan for when you can open a 529 or other education savings plan. Maybe baby’s first birthday is an achievable goal to start saving. Maybe you can get started when your baby starts preschool, lowering daycare costs or giving you more time to work. Put your plan in writing and save it with other important documents so you can hold yourself to the commitment.