When you’ve got a new baby on the way, there are approximately one million things to think about – and another million things to add to your household budget. So, here’s a quick guide to budgeting for new families, including what costs to expect and how to plan your finances for a growing family.
The Cost of a New Baby
There are lots of ways to start a family, such as adoption, but if your plans include a trip to the doctor, there are certain costs to expect. Your expenses as a brand new parent will vary widely depending on your location and health insurance, but some general costs to keep in mind are:
- Prenatal: If you’re on an insurance plan with maternity coverage, the majority of your prenatal care, including screenings and regular visits to your doctor, will be covered. Without insurance, expect to spend around $2,000 at a minimum – and more if you’re looking at birthing classes, prenatal yoga and so on.
- Giving birth: The hospital expenses to deliver a baby run around $15,000, but again, health insurance will cover most of that cost. Do check in with your insurer about expected out-of-pocket costs, which often come to $2,000 or more.
- Postnatal: According to the Health Care Cost Institute, birthing parents can expect to spend around $3,000 in their first postpartum year on services such as lab tests, surgery and physical medicine.
- Baby’s year one needs: From food to strollers to diapers, the mostly cost of bringing a new baby into your home will add up fast! Use cost calculation tools online to start estimating your expenses, which for many families average just over $13,000 for the first year.
How to Budget?
When calculating new baby costs, it’s natural to feel a little overwhelmed! Instead of trying to tackle it all at once, here are three budgeting tips to get you started:
- Do a personal financial audit: Instead of going on autopilot, sit down and map out your current financial situation, including savings accounts, debts, credit cards, monthly expenses and so on. Understand where you’re starting and where there’s wiggle room to accommodate new costs.
- Pay off high-interest debt: As far as possible, prioritize paying off debt before the newest member of your family arrives; especially high-interest credit card bills that will continue to grow over time and eat up more and more of your family’s earnings.
- Make a household budget: If you don’t already have a budget for everyone in your household, now is the time to start! Track your monthly expenses and plan out spending ahead of time, so that it’s clear what money is allocated where.
Planning for the Future
The needs of a new baby are constantly changing – so keep one eye on the future and start saving as soon as possible! A few costs to consider might be:
- Daycare: Surveys show that the cost of childcare is on the rise. Depending on location and type of care, many families spend upwards of $10,000 per year on daycare.
- School: Even if kids are attending a free public school, families will need to budget for school supplies, field trips, library late fees and so on.
- Summer camp: Keeping kids occupied in the summer is no small feat! Summer camp, swimming lessons and day camp often appear in families’ warm-weather budgets.
- College: It’s never too early to start saving for kids’ education. Check out a 529 tax-advantaged savings plan, which is specifically designed to help families save for education with less of a tax burden.