The Cost of Having a Baby: What to Expect

Budgeting for a new family member

Bringing a child into the world is an exciting, life-changing experience. While it’s often said that kids are expensive, there are several factors that contribute to these costs. In this post, we’ll break down the key expenses you should consider as you prepare to expand your family.

Cost of giving birth

The cost of giving birth can vary widely by your health insurance plan and is on average between $2,000 and $3,500 when using insurance. I had great insurance when I was pregnant with my daughter Camille, and paid $250 for all costs of her birth. With my son Gabriel, I was on a different insurance plan and paid $3,500 for birth costs. Review plan documents to get a better idea of how much you can expect to pay and call your insurance company for clarification if needed.

Unpaid parental leave

The U.S. has paltry parental leave policies, and depending on where you live and the policies at your company, you may need to take unpaid time off to bond with your child. If you don’t qualify for company and/or state-sponsored leave, budgeting for this income loss is imperative. Some states such as California offer paid family leave up to 70% of your salary, so make sure to research programs you qualify for to help offset this cost.

Insurance

Kids get sick a lot, so adding them to your health insurance is critical. Adding a child to your health insurance policy may more than double your premiums - so make sure to look at your plan documents to review costs of adding another person. When we had Camille, my husband and I reviewed both of our corporate polices and realized while the cost of adding her to either of our insurances would be roughly the same, my insurance had lower copays and out of pocket max so it made more sense to add her to my insurance.

Childcare

Depending on where you live and what level of service you’re looking for, childcare can be a significant cost. Currently, the cost of daycare in the state of California averages $1,200 for one child - that’s close to a mortgage payment! You can expect to pay even more if you live in a large city or hire a nanny, who can charge upwards of $25-30 per hour.

Formula or breastfeeding

If your baby will be formula fed, you can plan to spend up to $200 per month - and more if they require specialized formula or you choose to use an organic brand like Bobbie. Think breastfeeding is cheaper? Think again. Breastfeeding can cost more than $10,000 for a year.

College

Did you know that college cost increases have outpaced inflation? No it doesn’t just feel like college is more expensive than it was when you went - it is more expensive. Depending on when you give birth and the type of school you want your child to attend, you may be looking at four year college expenses of $800,000+ (before financial aid programs) by the time your child starts college.

Miscellaneous expenses

Diapers (so many diapers!), clothes (every 2-3 months at the beginning!), strollers, car seats, furniture, and fruit (IYKYK) - these are all expenses you’ll be bearing as well. Does your home fit your growing family? If not, you may need to upgrade this as well. As your children grow, you’ll likely be paying for activities, an extra seat on airplanes once they hit 2 years, and a new wardrobe after every growth spurt.

Budgeting for expenses

If this sounds overwhelming, don’t stress! Budgeting ahead of time can help you prepare for the cost of adding a new addition to your family. There are also a number of programs and incentives to help new families, such as the Child Tax Credit to ease your tax burden, 529 accounts to help you save for your children’s education in a tax efficient manner, and Dependent Care Credits to help you reduce the cost of childcare through tax exempt dollars. If you’re feeling overwhelmed, a financial planner can help you figure out how to ensure you’re financially ready to welcome a new addition into your family.