Financial Checklist - Plan for a new baby 

Expecting? How to Budget for Your New Baby

A new baby is something to celebrate, but that little bundle of joy can also add stress to your finances if you are not properly prepared. Not counting the cost of higher education, raising a child to age 18 costs around $233,610, according to the U.S. Department of Agriculture.

Here are four steps you can take to help reduce the financial stress that comes with having a child:

1. Cut down or eliminate credit card debt. Having less debt before the baby arrives will allow you to reallocate more money toward childcare expenses. Use our credit card payoff calculator to figure out a new monthly payment.
2. Calculate all monthly childcare expenses. Start investigating how much your childcare expenses will be. You probably already know this, but I am going to say it again anyway: You should take the minimalist approach and only buy the baby gear you actually need. Diapers, formula (if you’re going that route), childcare, clothing are all needs, but baby kneepads? Not so much. Once you get a good list, add everything up.
3. Create a new budget. Add your upcoming childcare expenses to your budget and determine what expenses you can reduce or eliminate before the baby is born. Make as many adjustments as needed to compensate for the anticipated expenses so you can balance your new budget.
4. Implement new budget before the baby arrives. Now that you have set a new budget, start using it two to three months before the baby is born. Since you won’t be using the childcare expenses, yet, put that amount into savings to build a cushion for unexpected expenses. Establishing and keeping an emergency savings is even more important as your family and necessary expenses continue to grow. This will also help you grow accustomed to your new budget ahead of time.

Tips for Trimming Your Childcare Budget

Now that you figured out how your finances will change after your baby is born, you can start to look for ways to save on childcare expenses. Consider the following ideas.

• Watch for deals. Ultimately, saving money requires diligence. Keep an eye out for sales on the products you use most, so you can stock up when the prices are lowest. Also, when it comes to disposable diapers most companies offer loyalty rewards so look out for these programs on their packaging.
• Buy cloth diapers. A phrase that can divide a room quickly. Cloth diapers have come a long way since the 1970s, so it’s worth noting that you can save money in the long run this way. Although it can be a large up-front cost, the diapers adjust in size as the baby grows, so you’ll be able to reuse them until your little one is potty trained.
• Buy second-hand or discount clothes and toys. You don’t have to purchase everything brand new. I’m not saying to risk your child’s safety and buy a used car seat off Craigslist, but a hand-me-down crib from a relative, used baby monitor from a consignment shop, and baby clothes and toys from garage sales are totally fine. Remember: babies grow fast, so they don’t stay in the same clothes for long and their interest in toys changes frequently.
• Make your own baby food. You may be thinking, who has time for that? I am with you, but pureeing your own peas will save you money. Look for recipes for how to make your own baby food once your little one is ready to try solids. Now is the time to also stock up on other budget friendly items like oatmeal and Cheerios.
• Contribute to a Flexible Spending Account (FSA) for child-care expenses. If you have the option through your employer, a married couple can contribute up to $5,000 per year into an FSA for child-care expenses. Having saved ahead can make hefty day care bills easier to stomach and can also reduce your taxes.

Can it get expensive preparing for a baby? Yes. But having a budget in place will help you manage those expenses and be able to prepare for them well in advance. A budget will also show you if you’re going overboard in any particular area (hello, adorable tiny clothes).

Now that you have a plan in place, focus on living by that plan and being excited about bringing your new addition into the world!

Tracey Hoefert
Retail Services Manager
traceyh@frontierbk.com