If you are considering having a child or are already expecting, now is a good time to start planning financially. There is no mistake that having a child is expensive but if properly planned out the impact does not have to be so dramatic. They key is to understand all costs associated with raising a child.
For starters, you will likely pay $100 or more per month on diapers alone. Next, your daycare expenses can range from $100 a week to as much as $250 or more if you go with a nanny. For the first year alone, you can pay as much as $12,000 for various costs associated with the baby directly. According to the U.S. Department of Agriculture, it costs a middle class family $250,000 to a raise a child to the age of 17. That figure does not include college.
That money goes to a variety of different areas, such as:
- Medical Expenses: Even with workplace health insurance, there will be out of pocket expenses. Without health insurance, delivering a new baby can cost as much as $8,000 for vaginal delivery and $12,000 for cesarean delivery. TIP: Be sure to check the terms of your health insurance for what they will and will not cover. Before you have your child, confirm how much the insurance company will pay. Sometimes your insurance will cover up to 70 percent or more of the delivery room fees. This will vary from employer to employer. You may be able to increase certain types of coverage based upon being pregnant.
- Maternity Leave: In many cases, maternity leave can cover up to one to three months. Beyond that, you have an option to use leave as specified in the Family Medical Leave Act (FMLA) but that is without pay. Once you check with your benefits provider to ensure how much paid time you will have off, and then determine how much FMLA time you will use.
- Child Care: If both parents work for a living, then you should be prepared to pay for probably the most significant financial expense facing new parents, the cost of child care. Childcare expenses can range from as little as $60 to $250 a week or more. On the higher end, that is much as $13,000 a year.
- Diapers and Wipes: Babies will go through as many as nine diapers a day or more. Depending on the brand you choose, you will likely spend as much as $1,200 ($100 per month) per year or more until your baby is potty trained.
- Formula and Food: You can expect to spend $1,000 - $2,200 for the first year on baby formula. This cost varies depending on whether or not you use powder or liquids. Powder is less expensive than liquid. On overage, you will spend about $40 per week on infant formula. Once your baby is 4-6 months old they will begin to eat baby food in addition to still drinking breast milk or formula. Baby food averages $1 per meal.
- Clothing and Shoes: Clothing and shoes can range from $500 - $1,200 for the first year. There are two primary factors to consider when it comes to the cost of clothing. The key is brand name vs. non-brand name. You can save significantly by avoiding brand names or waiting for sales. Another factor to consider is that children grow fast. In many instances, they may wear an outfit only two or three times before they have outgrown it.
- Life Insurance: Obtaining life insurance to ensure that, should something happen to either parent, both the surviving parent and child are well taken care of is highly important. The cost of each policy will vary depending on several factors including: policy value, health conditions of each parent and age.
- Legal Fees: There is no getting around the cost of having an attorney prepare a legal will naming a guardian for the baby should something happen to both parents. It is almost never a wise decision to have a judge decide on your behalf without your opinion. In addition to the written will, there are other estate planning options you should discuss with your attorney.
- School: There many choices when it comes to your child's education: public, private, home schooling or boarding school. It is your choice where your child goes to school ranging from pre-kindergarten to high school. Public school is paid for by your taxes; therefore, there is not an extra cost for sending your child to public school. Depending on if you hire a private teacher or teach your children yourself determines the cost of home schooling. Hiring a private teacher can be costly. Both private and boarding schools can be expensive, ranging from as little as $3,000 to more than $50,000 a year. There are many variables that determine the cost of each. However, the primary reason you may choose a private school over a public school is the quality of the education. On the other hand, some public schools provide just as good an education as private schools. You will have to do a lot of research to determine what is right for your child.
Click Here for a list of other expenses you will likely have to pay for during the first year.