While having a baby may seem like a great idea, the reality is that it's not a cheap thing to do. Babies are extremely pricey investments that only get more expensive as they continue to grow up. A USDA study from 2017 revealed that the average cost of raising a child is roughly $13 000 just in the first year. That cost can then go up to well over $230 000 by the time the child is 18 years old. This finding was based on a two-child and married-couple family with a middle-class socioeconomic background ($59 200 to $107 400).
It's not hard to see why it's so expensive to raise a child. There are the medical-related costs that come from your pregnancy and giving birth to your baby. Then there are any costs that can come up from having to either reduce work or completely taking time off altogether. Finally, there are the costs that are associated with raising your child long after birth.
When you really think about all those aforementioned facts, it makes it appear as though raising a child is way too expensive. But if you really want to start a family, you may believe that it's worth going into thousands upon thousands of dollars in debt to do so. How can you manage money in a way that works while raising a child?
There are certain steps you can take before your baby is born to manage money properly. Make sure that you know how your prenatal care and your baby's delivery is being paid for. This means double-checking with your insurance to see how much they're paying compared to how much you'll have to pay afterward. You'll also need to figure out which partner will go on maternity or paternity leave, as well as any necessary childcare that you think you'll need. Before you factor childcare costs, however, factor in any and all costs that you may not have thought of- including clothes, diapers, food, and much more. A baby shower can help, too- whether you need items or money or both. Finally, ensure that you know that you have insurance coverage for your newborn.
After your baby is born, you may think less about managing money and more about your baby's well-being. But you can still manage money in ways that you can even pass on to your kids in the distant future. First off, update all your beneficiaries on all of your accounts. This includes creating a will, finding an executor for the will and determining who will take care of your child should you and your partner pass away. You should also add financial products such as life insurance and disability insurance- assuming you don't have one or both of those already. Finally, start saving for your child's college fund as soon as possible. A few dollars here and then over several years will grow into more than you think when your child is considering college.
All of these tips will benefit you and your partner's financial situation both before and after your baby arrives. But the biggest tip to utilize is to be more responsible with your money. Practicing careful financial planning and careful spending is important, to begin with. But when you add a baby into the mix, those things become even more important. Worrying about your baby should be your primary focus, rather than worrying about whether you can afford taking care of your newborn.