Many people dream about growing up and having a family, but very few people are practical enough to calculate how much it will really cost.
The truth is that your dream come true can become your worst nightmare if you don’t plan ahead financially. Your new bundle of joy can end up costing a bundle unless you are organized and prepared to pinch every penny until it screams.
In this guide, we will be discussing how to budget for your first baby and practical action steps you need to take to secure your and their financial future.
Let’s start with a look at the actual projected costs of raising a child.
1. The Average Cost of Bringing Up a Child
The most recent estimate for the average cost of bringing up a child comes from CNN Money. As of January 9, 2017, they estimated that it cost $233,610 in 2015 to raise a child from infancy to age 17. College years will obviously cost extra. The annual total parents can expect to spend is estimated at between $12,350 and $14,000 each year.
The child is expensive in infancy because you need so many new things. However, there are ways of getting the essentials cheaply if you know what to expect.
The cost of housing also makes up about one-third of the cost of raising a child, as people get a larger apartment or even buy a home and take on a mortgage in order to have room for their growing family.
Diapers do cost and so does the amazing amount of laundry one tiny person can create. Food is another top expense, and will increase as the child gets older, peaking in the teen years.
The lost wages, a woman will encounter due to maternity leave can be incalculable and considerable. Those with poor maternity leave provision will not have money coming in and lots of expenses going out. In addition, the gap in the work of at least three to six months can cost in terms of career as well, with the woman being seen as less promotable because she has been away.
Even if she wants to rush back to work, many daycare centers will not accept a child under six months. You’re allowed to save up to $5,000 per year from pre-tax dollars, but you must be married and file a joint tax return.
There are also FSA accounts for healthcare spending. The limit is now $2,600 annually. This can help offset the costs of doctor’s visits, prescription medications, and even many over-the-counter items if you have a prescription for them from your doctor.
Childcare expenses can total around $37,000 per child, with most of this spent during their pre-school years. Transportation, food, clothing and healthcare costs will all increase as the child gets older.
Dealing with the Unexpected
The dream of having a family can turn into a nightmare due to the unexpected.
Women who have trouble conceiving will have greater healthcare costs, particularly if they opt for fertility treatments and/or IVF.
Some women have problematic pregnancies, such as being in danger of having a miscarriage, in which case they won’t be able to work right up until the time the baby is born.
Others might develop high blood pressure or gestational diabetes and have increased healthcare costs.
We all dream of a perfect baby. Some babies are born prematurely and need round-the-clock care.
The only way to prepare for the unexpected is to make the most of whatever money you do have coming in, with a workable budget that will cover all the essentials, and a focus on saving rather than spending.
It should also mean planned parenthood, that is, having a baby with a schedule in mind rather than by accident.
Nature will of course have a role to play, but modern couples have many birth control options and women as well as men are tending to favor having a family later in life, when they are more established in their career and finances.
But of course, a baby on the way means rolling up your sleeves and getting ready. Once you are expecting your first child, let’s look next at financial preparedness.
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