Budgeting for a Baby

If you’re thinking about starting a family, or already have a baby on the way, preparing for the costs of raising a child can be daunting. Not only do you have to consider the cost of diapers and baby food, but you may even be thinking about starting a college fund or buying a house. Instead of becoming overwhelmed by these new expenses, consider some of ELM3’s budgeting tips to help ensure you don’t under-budget or over-spend on childcare costs.

1. Be a coupon queen. Some manufacturers send samples, coupons, or other freebies to hospitals to give to new parents, so before you check out, ask to see if you can get some of these money savers. Additionally, once you figure out which manufacturers you like, sign up for their email list online to start getting their coupons. You can also check Groupon each week to see if there are savings online or in your area.
2. Only buy what you need for the first few months. For example, you won’t need a highchair from the get go, nor will you need shoes before your child starts walking. Save your money for the important items — such as cribs and car seats — and buy other things secondhand. You can also ask older friends or family members for hand-me-down baby clothes and toys.
3. If possible, breast feed. Baby formula can be expensive and will add up.
4. Make your own baby food. When your baby transitions to solid food, invest in a food processor and start processing your own fruits and vegetables. You can freeze leftovers so they don’t go bad.
5. Buy in bulk. Buying diapers in bulk and online will save you a ton of money. Also, if you see clothes you like on sale, buy a bunch of the same shirts or pants in different colors. Birthday presents also tend to drill holes in your pocket, especially if your friends are having kids at the same time you are. Instead of buying full-cost items every time a birthday comes around, raid clearance sections and buy a bunch of birthday presents in one trip. Keep them in your basement, and when birthdays come around, you can just pick from your already-purchased stash.
6. Take advantage of dependent-care accounts. Some employers allow you to contribute a certain amount of pretax dollars each year to a dependent care expense account.
7. Be careful with mortgages. If you’re considering buying a house as you start your family, be careful not to accept an exorbitant mortgage. Ideally, your total housing expenses (including mortgage payments, property taxes, homeowner’s insurance, and other related fees) shouldn’t add up to more than 30 percent of your annual income. Once you take on a mortgage, try to pay more than the minimum monthly payments (perhaps $100 more a month). You can also consider putting your annual tax refund towards paying off part of your mortgage.
8. Prioritize credit card debt over student loans. It’s definitely smart to try to reduce debt before a child comes along; however, remember that credit cards tend to have much higher interest rates than do student loans.
9. Don’t forget your retirement accounts. It’s smart to start putting money in a college fund account, but don’t forget to continue to contribute to retirement savings accounts. Because college financial aid offices don’t account for retirement savings accounts when determining how much need-based aid to give you, putting more money into these accounts may pay off in the long run. It would also be helpful to schedule an appointment with us to determine where and how to save for college and for retirement.
10. After your done, check your budget against this estimate. This online calculator will show you how your projection compares to the average retail price of various required items. You can make sure your estimates are realistic without having to learn the hard way.