Budget Implications of Having a Baby
When most people think of hard economic times, they think of being laid off, not being able to pay the bills, and maybe even moving to a smaller house. Some people go so far as to not have children when times are tough.
The number of births, according to the National Center for Health Statistics, declined in all but 10 states from 2007 to 2008. The early figures reported on 2009 seem to be following the same trend.
Believe it or not, babies aren’t that expensive. That doesn’t mean there are no expenses that come with having them. It means that by not overspending or buying unnecessary items, most people can maintain a child just fine. Having a baby means you’ll buy clothes, diapers and maybe even formula. There are doctor checkups and accessories like car seats and cribs. So how can you fit all these baby expenses into the budget?
Stop and Save?
When a couple finds out that they are going to be parents, they often wonder if they should stop the debt snowball to save up for the baby. The answer is yes. Save as much money as you can in case something happens and you need the money immediately. Once everyone is healthy and home from the hospital, you can take that saved-up money and put it toward paying off debt if you didn’t need it for the baby. Read more.
An infant doesn’t care if he or she is wearing consignment clothing or sleeping in a used crib. Buy a $30 outfit at a retail store and then another one from a consignment shop at $3 and see if they notice the difference. Dave’s kids grew up wearing so much consignment clothing that they thought OshKosh B’gosh came from yard sales! Parents are usually the ones who insist that their kids have only the best, and that thinking is what breaks the bank. You can easily care for your child without spending a lot.
This is the other big issue that people think about when kids come up. The good news is that most infants don’t go from bottle feeding to biology class in a few weeks, so school doesn’t sneak up on you. When you are out of debt, have an emergency fund, and are putting money away for retirement, that’s when college planning starts.
When you hit Baby Step 5—college funding for children—start putting $2,000 a year into an Education Savings Account (ESA). That breaks down to $166.67 a month if you start when the child is born. At a 12% return, $2,000 a year turns into $126,000 by age 18. That should cover room, board and tuition, don’t you think? If you’re not at Baby Step 5 yet, use this as motivation to get there quickly!
Boys and Their Toys
In an interview with the New York Times, Queens College sociologist Andrew Hacker said “children are the most expensive item in every family’s budget, especially given all the gear kids expect today.”
The first thing to remember is that a child can expect all they want. It doesn’t mean you cater to their every whim, unless you’re a wimp of a parent. You are obligated to give your kids food, shelter, clothing and love. If they scream for a cell phone or a video game system that you can’t afford, guess what? They don’t get it.
Get creative in how you spend and save money, and you’ll find that money is no reason to not add those little blessings to your home.