According to NBC News, raising a child to adulthood costs at least $245,340. So not only is having children an emotional investment, it’s a financial one too that merits utmost planning and preparation. The financial impact of bearing and raising a child is a serious matter that can single-handedly dictate a couple’s future financial prospects. If poorly planned or executed, this can entail financial hardships not only for the couple but for their children as well. Here are five things you can do to prepare your bank accounts and wallet for a baby.
Determine Current Savings
The good news about having a baby as a couple is that you get twice the spending power and can enjoy tax breaks when filing your income taxes. From your combined paychecks, how much do you make? How much of that number is allocated to monthly expenses? The number you get by subtracting the monthly expenses from income will be your savings. This amount should be well beyond the $1,000 range for a couple expecting or planning for a baby. Baby formula alone costs anywhere between $30 to $120, something that will constantly eat up your savings and retirement funds if you’re unprepared.
Assess Current Living Conditions
Is your current household kid-friendly or large enough to accommodate new tenants, particularly small and fragile children? If not, then it’s best to wait for a more conducive environment to raise your children. The crime rate and accessibility to schools, libraries, healthcare centers, and hospitals should also be considered before any attempts to conceive a child. Expanding your existing home to fit a baby room will also cost money thus it’s better to take care of these changes first so that it doesn’t stack with the costs of raising the child.
Consult Experienced Parents
Your relatives or friends from work can be a great resource of information for financially preparing for a child, not to mention their advice is free of charge. Consult people about how they managed to stay afloat during the first six months of bringing a baby into their homes. What’s great about these casual conversations is that most of the advice is specific, right down to the cheapest brand of baby food and which grocery store you can pick it up from. Note that not all advice you get from experienced parents will be aligned with your culture and how you wish to raise your kids, so have a mental filter well established beforehand.
Expect the Financial Changes to Come
Knowing that your expenses will increase fourfold is too general and does not provide any foundation from which to take actionable steps. At a more in-depth level, look at how it will affect your current financial stature. For instance, your spouse will likely need to take a maternity leave that could last several months. And while maternity leaves are paid, some only last for up to six weeks, which basically means your spouse is not earning anything after the six months if she requires more time to recover. Another thing that could possibly change the financial landscape is your insurance costs. Insuring a driver with a baby on board can change the details of your insurance contract. Know that your child’s expenses are front loaded and a bit more expensive in their early years. According to baby center, you’ll spend approximately $10,000 on your baby’s first year in basic necessities.
Buy Stuff in Bulk
For those excited soon-to-be parents, you’re probably itching to start buying supplies for your child. Buying stuff in small quantities, however, cost more money than buying in bulk. Of course, it’s not entirely possible to load up on anything and everything that your baby could possibly need. Baby milk, for instance, has a fairly short shelf life, which means stocking up on three month’s worth of powder milk will likely result in food wastage. Buy things, such as shirts, shoes, towels, plates, spoons, and diapers, in bulk.
Preparing yourself financially for a child benefits you and the child’s future. You don’t want to bring up kids while in a financial struggle as this only burrows your finances deeper into oblivion. Lastly, remember to jot down your experience and use the information to help other aspiring parents in the future.