How to plan my Finances when about to have a baby: What are some considerations to be aware of?

Question

I would like some insight into the process for financially planning to have a child. Outside of the obvious upfront medical expenses, what are some important financial considerations that I should be aware of?

Answer 1

Here are the top hitters in my (recent) experience, in highest-first order:

Child Care

By far the biggest potential cost is childcare, whether this be a full-time nursery/kindergarten, child minder, live-in Nanny/Au-pair or just paying a baby sitter when parents need a night off.

This needs careful thought. In London, full-time nursery school (6 months to 4 years old) varies from 500 UKP to 2000 UKP per month, and the amount you pay does not guarantee the quality of the care/education.

If you have relatives nearby, these costs can likely be reduced, but you'd really need to pay the relatives somehow - meals, bling, holidays, a new bathroom, etc.

Loss of Earnings

Whether the mother goes on maternity leave, or the father gives up his job to be a 'house husband', the family income is going to be affected for a period of time. You can plan for this by researching what government or company benefits the mother or father will get and for how long. I suggest dividing this amount evenly across the whole period that the stay-at-home parent will be off, rather than trying to calculate "2 months' full pay, 2 months' half pay, 2 month's no pay", because if you get into a pattern of high spending in the first two months, what will happen for the next 4 months.

You also need to consider short-notice time off work when anybody is poorly. I suggest reserving some of your vacation time for unexpectedly-have-to-look-after-the-family time. When children start daycare/nursery, the germs cross-pollinate, so you get some really nasty strains of coughs, colds, diarrhoea and 'flu in the house, which could cause the primary carer to be unable to do their caring without (your) help.

Bigger Car

If you can't get a baby seat into your car because it doesn't have the proper fittings or doesn't have rear seats, you'll likely need to change your car. There are plenty of cars that are bigger in terms of people space without being more expensive, but it'll cost to change.

Insurances

If you have health insurance (e.g. US), you're going to have a proportional increase. Call your provider for details. Bear in mind that children have more illnesses and accidents than middle-age parents, so it could be a shock.

Some parents take out life insurance to provide for their childrens' financial future in case of the worst happening. This can be around 50 UKP/65 USD per month, but it all depends on the lump sum you're insuring for.

Equipment

As a new parent, you think you need an incredible amount of equipment such as Changing Station, Cot/Crib, 'Moses Basket', Carry-Chair, Car Seat, Travel Cot/Crib, Feeding Chair, Changing Mat, Baby Bath, etc.

When you bring a new baby home, you really only need a wipe-clean changing mat and somewhere safe for baby to sleep. You can buy anything else as you need it. In fact, it gives you more perspective to go shopping once you've had the baby.

Whatever you buy, keep the receipt and don't open it until you need it. Much easier to take back the, e.g. portable baby bottle warmer, if you didn't open it because baby is breast-fed.

When they become bigger (2 months plus), you'll need a Cot/Crib. Invest in an adjustable cot-bed - it's a bit larger than a regular Cot/Crib and the floor lowers as they get bigger, so you only need one for the first 2.5 to 3 years.

Food

If baby will have formula, there are baby-milk formula calculators on the web - in summary one box of quality formula is ~9 UKP/12 USD and this lasts around 4 days if fully formula-fed.

Once they're onto food, you need to factor in baby food options. You can either make your own by side-lining some of the adult meal and blending it, then putting it into individual plastic containers. This takes effort, so not everyone has the energy. Alternatively, you're going to have to buy baby food in jars, packets or boxes for 3 meals a day and there'll be little snacks in-between. Baby snacks are strangely expensive, so recommend fruit. Budget for 5 UKP/7 USD per day until they're eating a small portion of the family meal.

Clothes

A new baby really only needs vests, all-in-one suits, blankets for warmth. You can go mad buying cute outfits, but they get limited use as a new baby grows really quickly.

If you've a lot of family/friends and you have a tradition of some kind of "good luck" party ('baby shower'), then you can find that you end up being given lots of things. If you don't know the sex of the baby, ask people to get you a gift receipt if possible such that you don't get blue clothes for a girl. It may not bother you, but its' a pain when people say "Katie is a strange name for a boy?" just because your little girl has blue booties.

Child-proofing Your Home

This really does not have to cost a lot. Some people go mad putting soft corners on all the hard edges, covering the electrical sockets and generally sanitizing the whole home. It's up to you, but if there's a room full of sharp/poisonous things like a kitchen or utility room, you might want to put a 15 UKP/20 USD baby gate on that room. Putting the breakable or sharp things up high, or stored away in the attic is a sensible move too.

Answer 2

A major consideration is also formula. IF your child is breast fed, it will save you some money, but it doesn't work for all children. There are also a wide variety of prices/qualities of formula.

Answer 3

Child care - will a parent stay home? Bring Child to daycare? Nanny? This can range from $4k+ to nearly $15K for daycare outside the house. For a nanny (of course, we found a gal with a masters degree in early childhood development) it can run to a full salary, $30K in her case.

The extra mouth to feed, the diapers, clothes, etc.

Education - Will you plan to pay for the child's college? Some people can't or feel they shouldn't. If you will, it can run about $180K in today's dollars for a private 4 year college.

Ours is now 12, so I'm sure my aging brain has forgotten some of the obvious expenses.

Answer 4

Healthcare - can they go directly on to your health insurance, and at what cost? And get those immunisations lined up to ensure no later illnesses that can be expensive and avoidable.

Education - how are the schools in your area and what is the schools policy? Should you be considering moving and how long in advance? Your first choice may have a long waiting list, even for pre-schools. All these can have an impact on the investment in your current home.

Child-proofing - how safe is your existing home and will you need to invest in some child-proofing (stairs, cupboards, basements, electricity outlets)?

Answer 5

Maybe a larger house/apartment

Answer 6

You are going to miss way more work than you expect. Especially so if both parents are working. My wife and I both work and during the first couple of winters we couldn't average two weeks of uninterrupted work.

You get sick, the kid gets sick, school / daycare holidays. You stay home and if you job isn't cool with it, it can be a problem.