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How to Manage Baby Expenses

Jun 13, 2021 3 min read Ilana Polyak

Key takeaways

  • Childcare is likely to be the biggest expense, so consider all your options to get the best value.
  • The baby’s stuff can overwhelm more than the baby itself. You don’t need it all.
  • Embrace health coverage, but expect a big leap in monthly costs.



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.


Other Baby Expenses

In addition to diapers and childcare, new parents also need to account for other costs such as:

  • Healthcare: Even if you’re insured through work, it may not offset the entire cost of coverage for your growing family. Workers contributed $5,588 per year to their family’s healthcare coverage in 2020, compared to $1,644 for single coverage, according to a Kaiser Family Foundation survey Opens in new window. If adding your baby to your health insurance policy is too expensive, explore state and federal insurance programs for children.
  • Baby food and formula: Babies may be tiny but they still need to eat—and often. What to Expect estimates that a year’s worth of formula costs around $1,200. Breastfeeding could save money but you might need a nursing bra or a breast pump. Once baby starts eating solid foods, plan to spend an additional $45 to $115 per month. Homemade food costs less, but carries a higher time cost.
  • Baby gear: With car seats, strollers, breastfeeding accessories, bassinets, and more babies use a lot of gear. Consider these tips for managing those expenses.
    • Say yes to hand-me-downs: As a new parent, you will quickly discover parents of older children who are all too happy to pass off clothing and toys their children have outgrown. However, some items like a car seat are best purchased new for safety reasons.
    • Work it double duty: Don’t buy a piece of baby equipment that only serves one purpose. Emphasize items you can use for years to come, such as a changing table that sits atop a dresser or a crib that can later convert into a toddler bed.
    • Think before you buy: People were having babies long before wipe warmers became “obligatory.” Resist the urge to splurge on baby items before you know what you really need.


What you can do next

A new baby is exciting and can throw even the most meticulous budget planner for a loop. But planning carefully before the baby arrives will help you see which expenses are necessary and which ones you can forgo.


Ilana Polyak is a freelance writer who specializes in personal finance and the financial advisory industry. Her work has appeared in The New York Times, Barron's, Kiplinger's Personal Finance, Bloomberg BusinessWeek and CNBC.com, where she is a frequent contributor.


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