After long talks and extensive thought, you have decided you are ready to start a family of your own. There’s a lot to account for when welcoming a child into the world, not the least of which is the expense of it all. Having a baby is expensive, really expensive. In 2022, Brookings Institute shared that raising a child from birth to 17 costs close to $310,605, a number that is only going up due to inflation.
It’s important to be proactive about reflecting on your financial state, so you can begin to take timely steps toward building savings. Let’s explore areas where major expenses occur and tips to financially prepare.
Identify Areas of Expense
Clothes, food, and diapers. Those are likely a few of the expenses that crossed your mind when it comes to a baby. And yes, those costs count, but don’t forget about other significant costs such as healthcare and childcare services.
Budgeting for healthcare includes multiple stages – maternal appointments before the baby arrives, potential medical intervention needs, the costs associated with birth, and many appointments after. If adoption, surrogacy or IVF is the route taken to build your family, you’ll need to account for those significant expenses when budgeting. Depending on your health insurance provider, you may need to opt for a high deductible plan. Expenses are paid out of pocket until you reach your deductible amount so costs associated with routine doctor visits and checks-up can build quickly but then taper off. Be sure to review what your insurance covers and what it does not. And don’t forget, once the baby arrives, adding the new child to your health plan will increase premiums.
The next expense to think about is childcare services. If the parent(s) are employed outside of the house prior to the baby’s birth, will the parent(s) return to work outside the house following parental leave? If so, who will watch the baby? If you use childcare services, research caretakers and facilities in your area to find the best fit with your lifestyle and budget. If one parent stays home, you must account for the loss of income and how it will impact your household’s finances.
Financial Preparation Tips
Having a baby is such a wonderful and exciting time. Based on your needs and unique situation, here are financial preparation tips worth considering:
- Pay Down Debt – Lowering your debt frees up your income. Eliminate bad debt such as high interest credit cards first.
- Begin saving as early as possible – Time is on your side when it comes to saving. If possible, start saving even before you’re expecting. Determine the minimum amount you will put aside each month and do it consistently!
- Overestimate spending – As much as you try to predict possible expenses, life can always throw you unexpected curveballs. Overestimating your spending can lead to additional financial padding, which will be useful in the future.
- Stick to your budget – Temptation to buy another cute outfit or baby toy happens. Resist temptation and stick to your budget. Buy what you need, not what you want.
- Seek out experts – Not sure where to start or how to stick with your plan? The team at Chelsea Groton is ready to help! Stop by any branch or schedule an appointment to meet a team member who will walk you through each step to financially prepare for the baby’s arrival and will continue to support you as they grow.
