How to have a baby without having a financial crisis

Last year, the cost of raising a child to age 18 for middle-income families rose to $245,000 – and that is not including college. Many of those expenses – about $20,000 of them – could come in the first year when parents factor in child care, medical expenses, and baby equipment. Of course, the value of having a family cannot be counted in dollars alone. But smart would-be parents will recognize that a child comes with a serious punch to the pocketbook, and prepare accordingly.

1. Create a new budget. 

Write down your current income and expenses, using pencil and paper, a spreadsheet or a budgeting app. Next, factor in new expenses that come with having a baby — things like diapers, formula, baby gear and daycare. Daycare center care for an infant costs, on average, $972 a month, but decreases as the child gets older.

2. Save as much as possible. 

Aim to save enough money to cover six-nine months of living expenses in an emergency fund before the arrival of your little one. The goal is to have enough set aside to pay the necessities including mortgage, utilities and groceries if you or your partner were to become ill, injured or unemployed. Keep adding to your emergency fund on a regular basis.

3. Plan how to care for your new addition. 

The Family Medical Leave Act allows most parents to take off 12 weeks from work during the first year after a birth or adoption. But only 11 percent of employees have access to paid leave. Find out what sort of parental leave coverage you and your partner have, if any. Then determine how much time you can afford to take off. You may need to cut expenses and save money now so that you can afford to take off additional – or any – time when the baby arrives. Also, consider whether later, if one parent decides to stay home to care for the baby, you can cover expenses. Perhaps your employer will let you switch to a flexible schedule, job-share, telecommute or cut back your hours. Explore your options now.

4. Get covered. 

Health care costs in the United States for pregnancy and childbirth are the highest in the world, although health insurance can help minimize those costs. You can apply for coverage even while you are pregnant. Most health insurance plans are required to cover maternity care and care for the child. Be aware, however, that you will likely need to pay medical fees up to your deductible. Your insurer, your physician or your hospital can help you estimate charges for labor and delivery. If you have a flexible spending account for health care and/or child care, you may want to increase the amount you save. Now is also a good time to review life insurance policies, too. Chances are that you will need to add to an existing policy or acquire a new one when you become a parent. Also make sure you have (or apply for) disability coverage. Be sure to check whether your plan will cover pregnancy as a disability.

5. Update your paperwork. 

Make plans to update needed documentation, including wills, life insurance and tax documents. If you have savings accounts, education savings plans or trusts, be sure those documents are correct and updated. After your child arrives (by birth or adoption), be sure to obtain a Social Security number for him or her, and verify that he or she is added to your health insurance coverage.

6. Get out of debt now. 

As you can see, expanding your family comes with plenty of expanding costs. If you are struggling with debt, eliminate as much debt as possible before adding to your household. If you are certain that you cannot get out of debt on your own – for instance, you cannot make monthly minimum payments or your total debt is more than your salary – consider contacting a reliable debt relief company for assistance.

All of these expenses can be daunting, but remember that many other parents have successfully afforded a baby. In fact, calling on an experienced parent’s wisdom can help with everything from selecting baby equipment to how to budget and save. Take smart steps to plan, and you won’t be caught off-guard by the costs of a child.

Andrew Houser

Post to Twitter