When is Having a Baby Financially Doable?
Is Having a Baby financially Doable?
In the foundering U.S. economy, many couples are procrastinating on their procreation due to their economic circumstances.
"We definitely delayed having kids because of the economy when my husband was laid off," says Ashley Whitaker, who lives in Hollywood, Fla., and is tackling her budget to accommodate a baby. "Now that (he) has a job, that was huge. That was No. 1 in taking into consideration having kids at this time."
A middle-income family with a child born in 2010 can expect to spend about $226,920 over the child's first 17 years, according to a U.S. Department of Agriculture report in June 2011. And that doesn't include college.
The good news?
"The majority of people (56%) are going full-steam ahead in the baby-making despite the economy" according to a recent poll by Care.com, says Katie Bugbee, managing editor of the site. The poll was taken in July 2011 with nearly 300 parents.
From adjusting career goals to buying a mountain of diapers, here are some financial points to consider before having a baby.
Does Your Job Fit Your Needs?
Your job may take up 40 hours per week, but raising your kid is also a full-time gig. Plan accordingly to juggle the two, says Julie Murphy Casserly, CFP, author of "The Emotion Behind Money: Building Wealth from the Inside Out."
Two prime points to consider are whether you're passionate about your career and whether your job pays enough to fit your needs, Casserly says. If the second need isn't met, consider asking for time instead of money.
"A lot of employers are really hesitant to give people the income they want, but they may be able to negotiate days off," Casserly says.
To plan for having a baby, Whitaker says she researched her company's maternity-leave guidelines and its schedule flexibility. She also discussed the role of primary caregiver with her husband, such as who would be on duty when the child gets sick at school.
Who Will Take Care of the Kids?
Couples will need to determine whether one parent will take a few years off work and stay home with the child, and whether that method will save money.
"(Child care) is pretty much another mortgage payment," Casserly says. "In most cases, when I'm doing budgets, for most parents it's $1,400 to $1,600 a month" for child care for two kids.
Don't be afraid to get creative, and remember that stay-at-home parenting isn't just for the moms.
"More moms who thought they were going to stay home decide to hold on to their jobs," Bugbee says. They need the extra health insurance, dual-income security, 401(k) money and the mental stimulation, she says.
When both parents go back to work, Casserly has seen families try "nanny sharing," where several families pay for one nanny to care for up to four children.
Bugbee says those child-care costs won't go away when the child reaches kindergarten. They just decrease. Parents who work full-time might need a baby sitter or after-school service to help bridge the hours between the end of school and work.
Diapers, Toys and Grocery Bills, Oh My!
Diapers alone can reach up to $864 each year, depending on whether they're cloth or disposable, according to BabyCenter.com, a parenting information website. The grand total for a newborn's first year can be more than $10,000. That includes items such as child care, feeding supplies, the stroller and other gear, and the nursery.
Casserly suggests determining a set amount you can spend on each category of spending on your child. Although not a parent yet, Whitaker already has been doing this for a few years.
"Every time I know someone who has a child or has a baby registry, I make lists of items and costs," she says. "It makes things less overwhelming."
The Family's Big-Ticket Items
Adding your tiny baby to your family could still mean needing a bigger house and/or car.
Bugbee says you'll need to make sure one car seat will fit in your car and more if you plan to add kids later.
Your house is next up for a change. Do you need one room for the parents, one for each child and one guest room? Will you add kids later? Consider your options, which can include buying a foreclosed or short-sale home, Casserly says.
Bugbee says one big-ticket item you can't forget is yourself. This may mean budgeting to keep your gym membership, hire a part-time housekeeper or dog walker, or plan a night out.
"After a little bit of time, you want to go back out to a restaurant and dress up and (do) those kinds of fun things with your spouse," Bugbee says. "And you need to budget for that and the baby sitter."
How Much Insurance Will I Need?
Insurance will play a big role in your child's health, financial security and even college savings.
Women who are planning to get pregnant can sign up for short-term disability insurance through their employers. This can replace some or all income lost during maternity leave.
The mother's regular medical insurance may pay for doctor appointments, so it's important to check coverage before the pregnancy, Casserly says.
After the child is born, sign him or her up through your employer's health insurance plan within 30 days. Your premium will most likely climb, Casserly says, so remember to plan for this in your budget.
Casserly also recommends looking into life insurance plans. These can cover funeral costs, emergency funds, mortgage, debt payments, college savings, child-care costs and income replacement if one or both spouses die.
"When I go through those categories, (my clients) always wind up with a $750,000 to $1 million" policy, she says.
Save Enough for College
Calculate the cost of college tuition for 20 years in the future, and account for inflation. The tab may shock you.
"All of a sudden you're going to fall off your chair," says Beth Walker, managing director of The Wealth Consulting Group in Las Vegas. Start saving the day the baby is born.
Walker suggests planning to provide $20,000 per year in today's dollars for in-state public school and $37,000 for out-of-state or private.
To save up that money, most parents opt for a 529 plan, Coverdell Education Savings Account or cash-value life insurance policy. Each has its benefit in how it's used and whether it's tax-advantaged, Walker says.
But expect to pay only 40% to 50% of college costs, Walker says. Student scholarships, work-study programs and grants can help with the rest. And don't forget to fill out financial aid forms such as the Free Application for Federal Student Aid, or FAFSA.
"It's like creating your own Rubik's Cube and just figuring out the right recipe for success for you," Walker says.