CNN Money states that a middle-income, married couple with two children is estimated to spend $233,610 to raise a child born in 2015, according to a report released by the Department of Agriculture. And that number only covers costs from birth through age 17 — so it doesn’t include college expenses.
Families can expect to spend between $12,350 and nearly $14,000 a year, on average, to raise a child. Nerd Wallet also found that:
- 44 percent of U.S. parents believe their baby’s first year of life will cost $5,000 or less.
- 61 percent anticipate friends/family will contribute more 20%+ of the expenses during the baby’s first year.
- Among current parents, 57 percent regret not taking more financial action during their baby’s first year.
- 33 percent wish they’d started or contributed more to a college savings plan for their child.
I lovingly refer to children as money sponges. They soak up all of your money! I can’t even think of a larger expense. For most couples, parenting is a “figure-it-out-as-you-go” sport. I sat down with a first-time dad to talk about how he is preparing for a household of four (one being their dog).
As someone who has only babysat about 5 times in life (and it was more the “parents-put-them-to-bed-before-they-leave-and-you-watch-TV all-night” kind too), I was curious about how this all works:
First off, congratulations! I am super excited for you both. When is your wife due?
In about three weeks!
Three weeks!? Wowza! Do you know what you are having?
We do, a boy.
Cute! Do you have a name picked out?
We do, but we are keeping it to ourselves. For now, we call him “Chicken Parm”.
[Laughs] Okay. Whatever you want. So let’s get into it! Did you and your spouse discuss the cost of having children prior to pregnancy?
We did not talk about the cost of children when we were dating or engaged, we were more concerned about where we were going to live and how much that was. But once we got married and decided we wanted a family, we both did research on costs.
What sources or approach did you use to research costs?
My wife mostly just Googled. We didn’t go to particular sources.
How has the cost of a pregnancy affected your normal budget?
Actually, pregnancy has not affected our normal budget too much. My wife is healthy so *knock on wood* she is doing well. We are putting away $750 a month to our baby’s fund. We took a “Baby Basics” class at the Children’s Hospital of Philadelphia (CHOP) for $150 and a baby CPR class for $50.
Any “baby” related activities (books, clothes, toys, etc.) or costs (doctors, classes, etc.) were charged to our credit card (Citi Double Cash) and then I took it out of the baby fund as if it was paid out of that account.
Most of the furniture we have were gifts from the baby shower.
Otherwise, nothing too expensive. Once we need to pay for daycare is when the real expenses will hit.
Are there any day-to-day costs so far that were unexpected?
Nothing unexpected but we spent some money on maternity clothes like dresses and bras for my wife.
This might be a weird question, but do you think it would be cheaper to have a boy or girl? I’m a girl…it feels more expensive to be a girl.
I’m not sure, no one has ever mentioned that.
Have you discussed the loss of income if one or both of you leave the workforce to stay at home?
Yes, my wife gets 8 weeks paid maternity leave and 4 weeks unpaid. I myself get 3 weeks unpaid, so that’s 15 consecutive weeks! Since my wife won’t get paid for 4 weeks that is two paychecks missing for us. Luckily, by chance, my work bonus should hit at that time so we should be okay.
So what’s the plan when you have to go back to work? How did you financially investigate that?
We actually decided to do a nanny-share with one of our neighbors.
What the hell is a nanny-share?
We will basically share a nanny which we think will work well because it is safer than daycare. At such a young age there are a lot of germs at daycares and so we thought this would be a good alternative until our baby needs to socialize.
It’s also great because we know where our baby will be and if one of us has to work late, someone should be around to be able to get to the children on time. Many daycares charge by the minute if parents are late.
The other couple we are doing the share with are also doctors too, one is a pediatrician!
Score! How did you go about determining that route?
Another couple in our neighborhood is due around the same time as my wife so it worked out. We all decided that around $1,500 to $1,600 was what we could afford and that we would do a minimum of six months.
We will most likely move to the suburbs after that because we currently both have an hour commute.
Did you look into other daycares and determine it was too expensive?
No, the daycares we looked at were a little less money, around $1,200 – $1,300 a month. We need to cover a few months in between when our maternity leave is up and the other couple’s is up, so we have a backup plan to have the baby in a daycare for a short period of time.
We did go daycare shopping and found that the average cost in the city (Philadelphia) was around $2,000 or $2,200, much more expensive than the suburbs.
Have you done any research on how much hospitals charge for childbirth?
Yes, we just consulted with some friends in the medical field. We didn’t do hardcore research. Most of them told us that the out of pocket cost would be around $2,000 for the delivery.
Now I know why so many people go to other countries for surgeries; I feel like hospitals just make up the costs!
So have you discussed how to save for your child’s college?
Sort of. My wife earned scholarships for school so she believes our kid should earn his education. I’m leaning more towards helping out financially. My goal is to put $2,000 away towards the baby every month. Some of that towards a 529 fund for the baby and obviously other expenses like formula and diapers. We are not sure how much that will cost yet.
Have your parents provided any financial advice for your first child?
No, my mother doesn’t talk about finances and my wife’s parents are pretty tight lipped too.
What steps have you needed to take financially to prepare for your baby?
Once we found out my wife was pregnant, we opened a separate, but linked, baby account in the beginning of 2017 with a 2016 surplus (about $3k) and started put $750 away per month.
We came up with $750 because we had been putting $500/month away for a new house the year before and then we shaved $250/month off of the budget with some cost cutting measures (less eating out, reduced house repair budget, etc.)
Do you have any advice for first-time parents preparing for baby number one?
The best piece of advice I can share is to have an idea of where your money goes. You would be surprised at where your money is spent if you keep track of it. You end up thinking, “Damn, I spent $50 a week on eating out when I could have put it somewhere more substantial.”
You can control your utilities by turning lights off and using less water but you can’t be a hermit either. You have to be realistic. There are some ways you can trim the fat. Eating out less, buying less new clothes, traveling less. You have to be diligent about taking from one pot and putting it in another.
Yeah, I hear you. Everyone does the best they can.
Exactly! I have no idea what I am doing, I’m just winging it. I am not sure if $2,000 is too much or too little.
They really should teach this stuff school. Not preparing financially for a baby, but money management. The fact that they don’t teach this in intermediate, middle, and high school is beyond me. I would skip a gym class or home ec class for money basics. This is why this country is in so much debt, because people aren’t taught.
I’m going to do everything I can to set my child up for financial success.