Creating a Budget Plan for a New Baby

Nov 1 | 9 minutes read
Creating a Budget Plan for a New Baby

Having a baby can be a joyous and financially stressful event. Even the smallest newborn might bring about significant life adjustments and monetary outlays for the baby. In the first year, how much money should a parent plan to spend on their child? Can you recommend any financial tools that could be useful? Here, we'll show you what you need to know about saving up for a new baby before they come.


Unique Costs

For this case study, we focus on the initial baby. That involves buying brand new items like furniture, strollers, and cribs, among many others. Of course, there is also the one-time cost of medical care associated with giving birth to a baby in the United States. To be sure, this is the one cost that defies accurate estimation.


Cost of Health care

According to a research paper published by the Healthcare Cost Institute in 2020, the average cost of labor and delivery in the United States for a parent with insurance is about $14,000. Costs associated with having a baby by a cesarean section range from $7,000 in Arkansas to $17,000 in New York. Similarly, there was a big disparity in out-of-pocket expenses, with the lowest in Washington, DC, at $1,000 and the highest in South Carolina at $2,400. (The most recent year with complete data was 2017).

Be aware that the price of standard obstetric treatment might vary greatly depending on factors like your location and health insurance. Find out how much you can expect to pay out of pocket for your pregnancy, delivery, and after care by reviewing your health insurance policy. In most cases, you will not be able to estimate your medical costs without first evaluating your health insurance plan.

Cost of Health care


Baby Supplies: Similar to the above medical costs, the one-time expenses for newborns might vary widely, although for different reasons. It's possible for this group to grow at an astronomical rate if parents' demands are met. Such as:

Getting Around You'll Want to Invest in a Stroller, an Infant Car Seat (Required by Law), a Baby Carrier, and a Diaper Bag. A portable playpen or bassinet could be useful if you intend to take your baby out frequently. There is a wide range of prices, as is the case with many of the items on this list. Depending on the manufacturer, the price of the stroller and any accessories (such as an adapter, snuggle bags, and so on) can easily exceed the $1,000 mark. New car seats and stroller sets can be had for less than $150, while used items or hand-me-downs can cover the rest of the bases. It's important to note that, at the absolute least, a new infant car seat should be purchased. When purchasing a used one, there is no surefire way to know if it has been damaged in an earlier accident or via heavy use.

Needs Around the House: A portable swing, bouncy seat, play mat, and/or jump seat can keep a youngster occupied and active. A bassinet or cot, mattress, basic bedding, a tiny dresser, a rocking chair, a monitor, and a diaper pail are all good to have on hand. Once again, the final price depends on the buyer's preferences. As opposed to car seats, all of these items have a more permanent home in your house, making them perfect candidates for the various online share and exchange clubs.

Feeding and Nursing Your New Baby: Nursing and feeding expenses, like any other aspect of caring for your newborn, will vary depending on your individual circumstances. A mother or father who is well enough to give birth at home without any If you're breastfeeding constantly, you won't need to buy a high chair or plates for months. Breastfeeding pillows, burp clothes, and maybe even a cape are overkill in the setting. Bottles, nipples, cleaning supplies, and either a single or double breast pump will need to be included in the budget if the parent plans to store breast milk for later use. If you can't breastfeed, plan on spending a lot more money on formula in the first year.


In addition to these one-time expenditures, you and/or your spouse may see a temporary reduction in income if you decide to take unpaid leave. If you qualify for FMLA leave, your employer must provide you with up to 12 weeks of unpaid leave to care for yourself or a family member after the birth of a child. Again, there are no hard and fast rules because small enterprises are not covered by the Family and Medical Leave Act. The best course of action is to talk to your company about the kinds of leaves they offer. Determine how you will handle your usual expenses (mortgage, utilities, insurance, groceries, etc.) while on unpaid leave.


Recurring Costs

Inevitably, after you have a baby, you'll have to start spending money on the baby on a regular basis. Take into account the following expenses:

If you and your partner plan to continue working following the birth of your child, child care costs will consume the largest portion of your budget. The cost of child care can range widely depending on factors such as your location, the age of your child, the number of hours per week they need care, and the sort of care they receive. In-center child care, according to the Care Index, costs little under $10,000 annually. Nanny or in-home care costs an average of $28,350 per year, though this number can be significantly more or lower depending on factors such as geography. Don't forget that tax credits, such as the credit for the care of a child or other dependent, may help you out with some of these expenses. You should check if you qualify to make sure. Expenses that are inevitable include things like Gerber formula, clothes, and diapers.


Apparel: The most recent edition of the USDA's The Cost of Raising a Child study suggests that first-time parents budget between $670 and $1,110 for their child's wardrobe in the first two years. Prices vary widely from person to person and from month to month, but the lowest average monthly budget is roughly $56.


Diapers: The price of diapers can budget from around $600 to about $1000 per year, depending on the brand, and wipes can cost anywhere from about $25 to $75 per year. Around $120 per month is what you're looking at. It is estimated that parents who use disposable diapers will go through 3,500 diapers in the first year of their child's life.


Budget around $100 per month for food costs after you start giving your youngster solids. When compared to what you'll spend on feeding a teenager, a child's early meal costs are minimal.

Part 2 of "Visiting the Doctor": Schedule six checkups, vaccinations, and other preventative care appointments in the first year, and a few more as needed. Find out what your costs will be under your health insurance plan.


Having one parent at home could be beneficial: There will be significant adjustments to the family budget if one of you decides to become a stay-at-home parent. The cost of one parent giving up paid work to focus on raising children can be significantly more than the cost of child care, when accounting for lost wages, benefits, and investment.

The couple's financial situation will worsen if one of them decides to return to the workforce. Reasons for staying at home can be personal or financial, as low-income families may not have access to the resources necessary to offset the high costs of living in some areas, despite government assistance. However, if it is for personal reasons, the couple can at least experiment with a one-income budget before the baby is born to get a feel for it, while simultaneously saving for an emergency with the second income.


Possibilities for Financial Intervention: Prepare your family's financial future for the arrival of a new child. In order to get started with your budgeting, please review the following checklist.


College Planning Resources: In 2021-2022, the average annual cost of a four-year college education was estimated to be between $10,740 (at a public, in-state university) and $38,070 (at a private, nonprofit university). It's never too early to start putting investment away for college with options like a 529 plan, Coverdell Education Savings Account, or UGMA/UTMA account. Some accounts, most notably the 529 plan, have also seen modifications to their functionality. K-12 education, apprenticeship programmes, and debt repayment are now all valid uses of 529 plans according to amendments made by the Tax Cuts and Jobs Act (TCJA) of 2017 and the Setting Every Community Up for Retirement Enhancement Act (SECURE) of 2019.

If you can afford it, you should get life insurance today in case you never end up needing it. If you and your spouse both pass away suddenly, your child will be taken care of financially if you invest a small amount each month. Life and disability insurance choices can be discussed with a human resources representative or an insurance agent.


Medical coverage: It just takes one major accident or illness to wipe out your money and put you deeply in debt if you don't have health insurance. If you don't currently have insurance, look into getting some, and prepare for the higher monthly price that will result from including your child in your budget.

Spend pre-tax budget on necessities like child care and medical bills through a flexible spending account (FSA). Establishing a health and/or dependent care FSA can be discussed with your employer or financial advisor.


Methods for Cutting Costs

Yet, as we've alluded to throughout, there are plenty of ways to provide for your newborn's necessities without going into debt, regardless of your financial situation. Namely:

Babies outgrow their clothes quickly, so consider shopping at a consignment or thrift store. You can save a lot of money by shopping at a local consignment shop or resale store instead of paying full price for their stuff. If your child has outgrown an item, you can sell it back to the store for cash or store credit in a lot of cases. The internet has made it possible to find high-quality things for very low prices (or even for free) through exchange clubs and parent networks.


Alternative Daycare Provided by Family/Friends: Rather than taking a sick day (perhaps unpaid) from work, parents should plan ahead and have family or friends available to provide emergency back-up daycare in the event of a child's illness.


Take Things From Your Pals: Try borrowing large, expensive things from friends who have small children who aren't using them, such as a crib, high chair, or rocking chair.


Gifts for a Baby Shower: Register so that party-goers can buy what you really need and avoid ending up with multiple baby rattles and photo albums.

Gifts for a Baby Shower


Reduced Quality of Life Due to Downgrading: The arrival of a financial child into your life is sure to alter your priorities, including those related to money. After looking over your new budget, you may find that the numbers don't add up. You could try to close the difference by reducing some essential features. Consider making some changes to your spending habits, such as downsizing your vehicle, switching to a cheaper brand of gas, or buying generic brands of often used products.


In Conclusion

Children are a wonderful gift—if sometimes an expensive one. The main thing to keep in mind is that averages don't mean much when the range is as wide as it is with costs around a baby. Good health insurance can protect you from hospital bills for the most part, but only planning and budgeting can help you handle the rest. The Finnish practice of sending birthing parents home with a simple starter box that can double as a baby bed shows that many of the thousands of dollars spent on our children's first years are more for our status than their well-being.

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