Kids are expensive. When you think about how much you'll be spending raising your little bundle of joy from infancy to college, it's daunting. Honestly, just the initial costs associated with having a baby are enough to make you dizzy. Just how much money should you save before having a baby? Is there an exact amount you should meet?
According to financial planning website, LearnVest, the costs associated with raising a child are upwards of $220,000 from birth to 18 years old. That's more than $12,000 per year for each child you have — give or take. However, Romper spoke with New York City financial planner Samantha Chen via FaceTime to get the down and dirty about childhood costs, concerns, and how to make it work.
Chen tells Romper that it's so easy to get overwhelmed with the minutiae of a family budget that it soon quickly overwhelms your every thought, but with a little hardscrabble investigating, and time spent budgeting, there's less worry that you'll fall into a state of penury after becoming parents. "You have to look at your finances from an emotionally detached position. If you go into it thinking 'I'll never be able to afford a kid,' or 'I'm sure we're ready,' you'd likely find evidence either way," Chen says.
She says that, ideally, most people will have a pretty good idea of what their situation is going into this budget, but that's not always the case. "You may think you know what's up when you pull back the curtain of your finances, only to find you're not investing as much as you thought, or your savings account isn't as high of a percentage as it should be," Chen explains. She notes that it's imperative you know where each and every dollar you spend is going, and that it's easy to forget about old subscriptions to dating websites or streaming services that you may still be paying, but no longer using. (Aside: I did this last month, and I was spending over $100 a month on subscription services.)
Chen tells Romper that the easiest way to do this without stressing is by using software that links to your accounts and gives you a detailed description of where your money is going, categorizes it, and splits it into percentages of spending, like Mint or Level Money. She says the goal is to spend no more than 50 percent on day-to-day living bills and expenses, 20 percent on savings and getting rid of bad debt (see: credit cards), 20 percent on play money (just the stuff you want and for filling your wine and candy closet), and 10 percent on investing outside of your 401K and IRA.
Chen went on to say, "You also really need to know what's up with your workplace. Some big companies are great and ready to handle maternity leave, and their insurance reflects that. Others? Not so much." Do you have good maternity coverage? Can you afford the deductibles related to your hospital stay and any possible complications that may arise? If you're looking at having a baby in the future, consider the changes in legislation. If the American Health Care Act passes in its current state, the costs of pregnancy alone are likely to skyrocket. Is your insurance likely to drop maternity care?
The average child costs between $8,000 to $10,000 in the first year alone, according to U.S. News. Do you have at least that liquid? If not, can you spend apace that without going into debt? Chen notes that it's a really big number, but says, "Honestly, if you live in a major metropolitan area like New York City or Boston, where I grew up, you could easily spend twice that, and you need to be prepared for that eventuality."
Chen also suggests that parents prepare themselves for maternity leave by understanding the policy of the workplace, and saving at least double the take-home amount for that period in the event that something unforeseen, like illness or a difficult childbirth recovery, occurs. According to TechRepublic, the United States ranks last for maternity leave rights, so it's important to note that there likely won't be any benefits coming your way while you heal from childbirth or bond with your baby after adoption. You'll also need to see if your employer actually offers any leave. If they are a small company of under 50 employees, they are not required by law to offer you any leave, TechRepublic noted. Chen tells Romper, "It's possible your employer isn't prepared or funded for your maternity leave and it's entirely legal to replace you in some instances. You need to know if you can pull off being without your salary while you job hunt or scale back." You need to devise a plan for if, and how, it would be possible to live on a single salary for a protracted period of time. Can your partner take on more work? Can you cut back in some areas, like trips out or expensive shopping or vacations?
If you work at a large company with a generous maternity policy, you still need to consider if you can afford child care, Chen advises. The average cost of child care is $1,000 per month, per child, according to TIME. Chen says that the money for child care should fit into the 50 percent of your budget used to power your life, and ideally not detract from paying off debt, saving, or investing in your future. "After all," she explains, "your child should have a room in your home — you shouldn't be preparing to have a room in theirs."
While the figures, specifically the idea of spending $10,000 the first year, feels a bit like you'll be bleeding money, Chen says you should remember that billions of babies are born every year, and every year, parents make it work. She also notes that as soon as you start trying for a baby, no one just hands you a bill the size of most American mortgages — it's little things over time. There are also ways to save money, with the noted exceptions being child care and health insurance. Chen says that it's optimistic to assume you'd have that initial $10,000 just hanging out, and if you do, that's great. But the most important thing to consider is if there's room in the overall budget to add this additional expense, or how you could make that room happen, without compromising on your investments.
Chen also says to accept help when it's offered. "You may not love your mother-in-law, and you may butt heads, but she may also be willing to share the burden of child care with you, and you should consider that," she says. She also suggests you meet with a financial planner if you haven't already, and try living without the money you'd be spending on your child for a few months before you try to get pregnant. Not only will that give you an idea of how your budget will feel when baby arrives, it's also serving as a cushion of savings you've started before you even get pregnant.
Children are pricey, and there are buckets of unexpected little costs associated with parenting, but, with a little planning, and a lot of studying, it's absolutely doable.