Parents-to-be may have felt a spike in their anxiety last month
when the U.S. Department of Agriculture (USDA) released its latest
report on the costs of raising a child. It estimates the average
middle-income family that had a child last year will spend $241,080
(in 2012 dollar values) to raise that child through age 17. When
projected inflation is added, that figure jumps to $301,970.
Naturally, these costs can vary by income, region and the number
of children in the family. Still, the report offers a reminder that
having a child is a financial decision as well as a personal
However you figure it, having a child is a serious financial
responsibility. Here are some thoughts on financing that
Some advance saving makes for a good start.
Starting to save money for a child's needs before birth not only
helps you build up some reserves in advance, but it makes sure
the budget shock of raising a child doesn't hit you at the same
time you are dealing with all the other adjustments of having a
Friends and relatives can be generous -- if
People often shower a new baby with gifts, but these can range
from the impractical to the redundant. For example, new parents
may receive dozens of outfits that the baby will outgrow within
six months, but nothing for the child to wear beyond that. Be
practical and give friends and relatives some guidance on what
would be truly useful by registering for gifts at a retailer for
children, or making an online wish list.
Parenthood can be a temptation to overuse
are the lifeline many Americans reach for when overwhelmed by
unexpected expenses, but this is an unsustainable habit. Using
credit cards to meet the additional expenses of parenthood puts
you on a dangerous path. The USDA report shows that expenses tend
to grow as the child gets older, and they will increase by leaps
and bounds if you have more children.
Having a baby is a perfect time to start formal
When it's just you, or you and your spouse, it's pretty easy to
play it by ear when it comes to figuring out what you can and
can't afford. A baby, though, is one of the biggest sudden
changes in expenses you are likely to have. That makes it a
perfect time to start budgeting to see how the new expenses match
up against your income.
Don't let the present overwhelm the future.
Retirement savings rates are already too low for most people, and
they can be the first thing to suffer when a child comes along.
Besides budgeting to meet your immediate expenses, you should
also budget to balance present needs with future ones, including
college for your kids and retirement for yourself.
What all this adds up to is a lifestyle change that goes beyond
the immediate care and feeding of the baby. To meet your new
financial responsibilities without resorting to credit and
neglecting your retirement savings, you may have to sacrifice some
of the money you were spending on yourself previously.
Dining out and entertaining are obvious targets trimming your
. After all, you're likely to have less time for those things once
you are a parent anyway.