Having a baby is one of the most exciting and worthwhile things you can do – but it also comes with a price tag. However, there are many ways to make it more affordable when you know what costs lie ahead. Here are 10 financial tips to help you afford the cost of having a baby.
How to Afford a Baby
Welcoming a new child into the world can be one of the most exciting times of our lives.
For expecting parents, it can also an anxiety-inducing experience, especially when you start wondering “how are we going to afford all of this?!”
The sooner you can start to financially prepare for your little one’s arrival, the more you’ll be able to enjoy those early days of becoming a parent.
Here are 10 ways to financially prepare for your first child.
Can I Afford a Baby?
How Much Does it Cost to Raise a Child?
The U.S. Department of Agriculture (USDA) estimates middle-income families will spend $233,610 to raise a child through age 17. Factoring in inflation, it’s closer to $284,570.
Cost of Baby the First Year
According to the USDA, the average cost of baby the first year alone is around $12,000 – but if that number worries you, don’t worry. There are plenty of ways to cut those costs substantially!
1. Put Together a Shopping List
This is going to feel scary and overwhelming at first, but once you get it all down on paper, you can start to tackle all of your upcoming purchases.
You can also use this list to populate your baby shower registry. Keep in mind that you don’t have to buy all of these things new – second-hand baby stores like Once Upon a Child or Kid to Kid can be amazing resources.
First things first, your baby is going to need clothes. Before you start buying new apparel for your little one, check out Goodwill.
Furniture for Nursery
Once you’re ready to start “nesting”, here are some basic items you’ll need for your baby’s nursery:
Mattress (don’t skimp on the quality of this – Newton Baby Crib Mattresses are excellent quality).
Bedding (You really just need a few tight-fitting crib sheets. No bumpers or blankets should be in the crib anyways!)
Nightlight (even better, get a Hatch Baby Rest for an awesome nightlight + sound noise machine that can be used for years).
Dresser (We got ours from Wayfair and have loved it – we just put a changing pad on top to make it function as a changing table).
Diaper bin and bags (We really like our Munchkin Step Diaper Pail)
Washcloths and baby wipes
Diapers (this is a great post about how many diapers you need)
Additional Reading: The No-Nonsense Baby Essentials List
Your baby needs to stay clean! Here’s what you’ll need to have on hand:
2-3 very soft baby towels (you can get one of these super soft hooded towels for FREE using the code CLARKS35)
Washcloths (not the same ones you use for diapers)
This kiddo is going to need nourishment non-stop. Having the right set of “gear” will make your job so much easier. Some of these won’t be needed until later on.
If you are able, breastfeeding is the most cost-effective solution for new parents.
If you plan to breastfeed, here is what you’ll need.
12+ bottles (with nipples) 4 oz and 8 oz.
Formula – if you have a Sam’s Club or Costco membership, this can be one of the best places to buy formula
Baby Plates, Spoons, and Forks
General Health and Maintenance
First aid kit
Baby nail clippers
Infant Car Seat
Pre-purchase as much as you can, but also plan for those new, ongoing expenses (think diapers, wipes, formula, etc.). If you don’t yet have a regular monthly household budget, make one, stat!
2. Start Spending Less (and Differently)
Don’t waste time here. Start cutting out those little extras and building your financial nest egg before you really need it. This especially important if one parent is staying home and you’re losing part or all of that income.
Many experts estimate that a newborn racks up about ~$12,000 in expenses during their first year.
See if you can save up that much before their arrival, as daunting as that might seem.
Even if you can only save up a few thousand dollars in the months leading up to birth, that will go a long way towards alleviating stress.
If you don’t already have one, consider opening a high-yield savings account. Set it to auto-deduct an amount that makes sense for you each paycheck.
Build backward from the amount you want to have saved once the baby arrives.
3. Get a Head Start on Saving for College
College may seem like a lifetime away, but the next 18 years will go by faster than you think.
With tuition costs quickly rising (and showing no signs of stopping), it’s a sad reality that most college graduates will finish school with a borderline-crippling amount of student loan debt.
Ultimately it’s up to you as to whether or not you’d like to help your child front the cost of their education.
If you open a college savings account now — even with just a small amount — that money will have 18 years to compound and grow (tax-free).
Making investing a regular habit is also a great opportunity to teach your child about discipline as saving. Lead by example!
You can also set up custodial accounts through the Uniform Gift to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) to allow your child (or another minor) to “own” securities and other assets like real estate before they’re technically legally able to do so.
This allows such investments to grow over time. As the child matures, so do these tax-protected investments.
If you can afford it, you may even want to consider opening a Roth IRA on your child’s behalf. The early investment allows for decades of compounding interest and offers tax benefits for when they reach their golden years.
4. Review your Insurance Policies
Have a life insurance plan and a retirement plan that is favorable to your child’s future. You should also include your baby in your medical plan as a beneficiary if your beneficiary is a distant relative or friend.
5. Set Yourself Up to Claim Tax Benefits Immediately
One your child is born and you’ve got the birth certificate in hand, apply for Social Security Number (SS-5 Form) for your newborn to claim a tax deduction. Many hospitals have these forms on-hand. You need your child’s social security number to apply for government benefits of any kind.
In addition, you might be qualified for a child tax credit, which will go a long way to lessen your financial burden. This credit is different from a deduction in that it is applied directly to the taxes you owe rather than your taxable income.
6. Get Your Baby Healthcare Right Away
To ensure that your baby’s health-care costs will be covered by your insurer, you’ll need to officially enroll them in your medical plan within 30 days of birth.
And while you’re filling out forms, take time to review the beneficiary designations on your retirement plans and life insurance policies.
Chances are you’ve named your spouse as your rightful heir, and you’ll probably want to keep it that way.
But if you’ve named parents, siblings or best friends as your secondary beneficiaries, you might want to replace them with your newest family member.
7. Use Your Employee-Based Benefits
If your employer allows you to buy life insurance through your benefits plan, sign up for as much as is practical as soon as you can (most experts recommend a total of five to eight times each wage-earner’s annual salary—to determine how much you need, plug your numbers into a life insurance calculator).
Many working couples may not have needed such protection in their pre-parent days, but the birth of a child changes the equation completely.
After all, if one or both of you die unexpectedly, your child will still need food and clothes and, in time, bicycles, braces, and college tuition.
A term-life policy purchased through a group plan is one of the most convenient ways to see that your baby gets what they need and deserve.
While you’re in your benefits office, make sure you check out your company’s family-leave policy. If you work for a company with 15 or more employees and your company offers paid sick leave, by law your boss must treat pregnancy and childbirth like any other short-term disability.
In practice, that usually means you’re entitled to six to eight weeks of paid time off. In addition, most employers these days follow the guidelines of the Family and Medical Leave Act, which requires that companies with 50 or more employees grant up to 12 weeks of unpaid time off.
(Some states have mandated more generous policies—California was the first state to create a comprehensive Paid Family Leave benefits program—check with your own state labor department for specifics.)
Don’t be alarmed if your company’s official leave policy falls short of what you’re looking for. Go ahead and try to strike a better deal. Network with co-workers who are parents to see what kinds of arrangements they’ve been able to work out.
Think through what you really want (More time off? To work part-time? To telecommute one or more days a week?).
Develop a plan to make it work; and then meet with your boss to talk it over. Don’t limit yourself to what’s in the employee handbook and assume that everything is negotiable.
You’re having a baby, after all!
8. Find Free Stuff, Grab Hand-Me-Downs
Beyond getting smart about spending, another great strategy is to connect with family members and friends about extras they may have laying around that could help your family out.
Make a list of what’s needed and share it with your friends and family with babies via social media or email.
Create a shared Google Doc that your network can plug into with what they can offer.
Just like the first few weeks when people sign up to bring over meals to new parents, employ this ongoing tactic to ease your family’s financial burden.
There are also many ways to find free baby samples and gifts to help you stock up for your little one as well. Before you head to the store, check out these alternative options to cut corners. It adds up.
9. Be Smart About Your Baby Spending
Spend more on products that can handle a great deal of wear and tear (and will protect your baby from harm), like strollers and car seats. These are smart investments.
When it comes to other purchases (think frilly baby pillows and newborn clothes) that will outlive their usefulness fairly quickly, cut corners where you can and go for cheaper versions. Take an experienced parent shopping with you to help you separate the necessary from the nonsensical.
Check out garage sales and consignment shops. When going second-hand, ensure that clothes and equipment are in good condition and have only been used for a short time (like a baby swing) so you’re not setting yourself up for future replacement purchases.
Resist the urge to splurge!
10. Consider a New Side Hustle
Don’t limit yourself to just reducing expenses. Consider the revenue side of things as well.
If one or more parents will be spending considerably more time at home with the baby, think of ways you can put that extra time to good use. After all, newborns do sleep…a lot.
There are hundreds of ways you can make some extra cash in your spare time. Consider them as you plan for your baby’s future.
The Bottom Line: How To Handle Having a Baby, Financially
When it comes to navigating the cost of raising a child, it’s not a simple or easy process.
You have to first know the costs you’ll be facing. Then, take the right steps to prepare before the baby arrives. Once your child is born, take decisive steps to start spending differently and finding creative new ways to bring in income (if necessary).
As with most things, it starts with arming yourself with the knowledge and then making smart moves to take advantage of the options that exist for you as a new parent.