How much does it cost to have a baby?
A study from financial website NerdWallet Opens in new window found that more than half of people hoping to become parents underestimated the cost of baby expenses in the first year. The study then analyzed spending in the first 12 months among households earning $40,000 and those making $200,000, and found that even the lower-income parents spent more than $21,000 on average—well above the $5,000 non-parents think they’ll spend.
In the first year alone, parents can expect to shell out for necessities including cribs, strollers, car seats and, of course, diapers. Childcare for working parents adds even more to the tab.
Corin Coyle knows the stick shock of baby expenses firsthand. While her family helped her with big-ticket items such as a car seat, stroller and crib before the arrival of her son, Jack, in February 2016, diapers were a whole other story.
“That was the most surprising thing,” Coyle, 34, of San Antonio, says. “Just the amount of diapers you go through. You don’t actually do the math until you have a baby.” According to pregnancy website What To Expect Opens in new window, new parents can change around 3,000 diapers in baby’s first year, potentially spending upwards of $900.
Since becoming parents, Coyle and her partner, Tim Buffington, have been forced to cut costs to free up money for Jack’s care. They don’t eat out as often, and, when they’re hankering for a movie, they head to the closest Redbox rental kiosk, not a theater.
Fortunately, a little planning before the baby arrives can go a long way toward ensuring you enjoy your tiny bundle instead of worrying about how much parenthood costs.
Childcare is the biggest expense
There are a wide range of childcare costs, depending on the setting and the quality of caregivers. NerdWallet estimated that an at-home nanny would set the average family back over $26,000 per year. It’s something only higher-income families can afford.
To tame the costs of child care, keep these ideas in mind:
- Double up: If you’re hiring a nanny to come to your home, ask if that person will watch another family’s child of a similar age at the same time. You’ll pay more for two children, but likely not as much as each parent would pay individually.
- Wait a minute (or a year): The older your child is when he or she starts daycare, the more affordable it will be. Infant care is the most expensive, because centers need to hire more staff to keep up with all the diaper changing, bottle feeding and rocking, according to Child Care Aware PDF Opens in a new window. Care for toddlers is less pricey, and pre-school is even more affordable.
- Shuffle your schedule: If you and your spouse or partner have some flexibility in your schedules, you may be able to save some money with part-time childcare.
- Take advantage of tax credits: If you pay for childcare so that you or your spouse can work, you may qualify for the Children and Dependent Care Credit. In 2021, the IRS Opens in new window will allow credit of up to $3,600 for children under age 6 and up to $3,000 for children up to age 17. Consult a tax professional for more information.
- Remember the long-term benefits: If your salary is close to what you’d pay in childcare, don’t assume that staying home makes the most financial sense. Staying in the workforce may help you qualify for pay raises and promotions in the future, and interacting with other people may help baby’s social development. If you can afford to stay home and choose to do so, that is a valid choice, too.