Are finances interfering with your family planning?
You are not alone.
I recently heard that college would cost $250,000 by the time my kids are ready to go. This did not worry me. You know why? Because there is no mandate I pay that. Really. Now, I will most likely support my kids through college. However, they may go to a less expensive state school, live at home for some of it, have them pay for some of it, applying for every scholarship and grant out there, etc. You get the idea. So if you fear you can’t afford to have kids, keep reading. I offer a different perspective on the matter.
I feel no pressure to live in abject poverty squirreling away every extra cent in a college savings plan for something that may or may not happen two decades away. Realistically, my kids will go to college. They have college educated parents, are very smart, and love learning. However, the entire college scene may look different by the time they go. Perhaps the bubble will pop and tuition will decrease. Regardless, paying for college is not something that keeps me up at night.
However, I have worked with clients who are overwhelmed with anxiety around this as well as all the other costs associated with having a child.
How much does it cost to raise a child?
According to the USDA, which has been tracking this for the last 60 years, a family can expect to spend $233,610 on a child born in 2015. This does not include college. Of course, there is variability based on where one lives and how many children they have. The more children, the less individual expense per child. This is because you can reuse equipment like strollers and cribs and the younger kids can wear hand-me-downs. Funny story, my aunt had two girls two years apart. She realized she had to stop buying them matching dresses because the younger one would then end up wearing the same thing 2 years in a row. But I digress, you can reuse a lot of things!
The biggest expenses of having a child.
Hands down, the biggest expense is child care. In some areas this can cost upwards of 25%-50% of your income. According to the federal government, “affordable” child care should not exceed more than 7% of the family’s income. Rates vary wildly across the country. However, care for infants consistently costs more than that for older children. In my state of Maryland, infant care runs, on average, between $24,000 per year and $39,000. Does it make more sense to have a parent stay at home? Not from a strictly financial perspective. Women who leave the workforce for more than 3 months face a stark reduction in lifetime earnings!
This varies by region, type of delivery, and your insurance. Many insurance plans have high deductibles. This means that you pay the entire deductible before they start paying for care. Medical Assistance covers the entire thing. Insurance doesn’t always cover home birth or birthing centers. Therefore, you may have to pay completely out of pocket for those services.
Disposable diapers run about $75 per month. Newborn babies go through a lot of diapers! Fortunately, this slows down as they get older.
Do I need all the baby stuff?
I’m sure you have read all sorts of blogposts outlining the “essentials”. You will need a car-seat, clothes, and a place for the baby to sleep. Most people need a stroller or wearable baby carrier. Outside of that, it’s pretty subjective. If you know you will be formula feeding, then that is an expense to consider. Breastfeeding moms may want to pump milk for bottles for back up when they are away. Health insurance covers the cost of a breast pump but you are on your own for the bottles, nipples, and cleaning brush.
How can I reduce the cost of having a child?
Be creative, be thoughtful, and be resourceful.
Reducing childcare costs
Assuming you either want or need to work, there are ways of reducing the cost of child care.
- Split schedules. Can you and your partner work opposite schedules or shift your work day so one of you is home for part of the time? Then you will need less childcare hours.
- Share a Nanny. The most expensive newborn care is a private nanny. Some families share a nanny with another family to reduce costs.
- In-home day-cares can be a great cross between a large center and a private nanny.
- Form a co-op. Do you have a friend with a baby or young child as well? Can you “swap hours”.
- Ask your family. Perhaps baby’s grandparents are still working full time but do you have a retired Aunt or Uncle who would be happy to help?
Think creatively, you may need to combine some of these options. For example, maybe you pay for an in-home day-care 3 days a week, have Aunt Mary watch the baby every Monday, and you work on Saturdays so you can be home Friday with the baby (your partner watches her on Saturday).
Reducing Delivery Costs
There is not a ton of wiggle room with this. However, if you’re fortunate to plan when you have your kids, pick the most robust insurance plan for that year during open enrollment. Keep in mind, you may need additional services like a lactation consultant or pelvic floor PT. You may have a higher monthly premium but then a lower deductible. Be thoughtful about this. Pull out a calculator and do the math.
Reducing the cost of all the baby stuff
Baby needs to eat, sleep, and have clothing/shelter. As mentioned above, breastfeeding is cheaper than formula feeding. Of course this is a really personal choice with more than just financial factors. If you will be formula feeding, start collecting samples from your pediatrician and OB. You can also register for formula and bottles.
Shop exchanges. Facebook and Nextdoor are ripe with parents selling or giving away their old baby stuff. Bottles, clothes, strollers, and pretty much everything but the car seat can be bought used. Oftentimes, these items are barely used.
Register for diapers or throw a diaper shower. You literally ask the guest to bring diapers in all sizes to help get you through the first year. You can also use cloth diapers. They have an upfront price but, especially if you pan on multiple kids, could save a lot in the long run. Be aware, it is a time intensive process to clean them.
Outside of a crib, car-seat, clothing, and diapers, the rest is optional. Less is more in this situation. You can always add items if you find you need them.
Rethink your expectations
This is where you need to be really authentic and intentional. Just because everyone you know has a nursery, you don’t have to. In fact, many babies end up sleeping in their parents room for the first several months. Your child can sleep in your room for as long as it works for your family.
Can you pull back at work? This is a season of life where many people are trying to get promotions. However, if your heart is pulled toward being home with your child, it may be worthwhile emotionally to reduce hours. Of course, this may hurt you financially in the long run but will save some costs in the first year.
Choosing to have a child is the biggest decision of your life. Certainly, there are financial costs. However, the emotional rewards are far greater.
Are you struggling with anxiety or stress? Nurtured Well, LLC can help with expert therapy and/or medication. Learn more today.