If becoming a parent is on your radar, you’ve probably heard the statistic that raising a child from birth to the age of 18 will cost, on average, nearly $250,000. That doesn’t even include the cost of college! A decent amount of that figure is often paid out right around the time your child is born.
The good news is there are a few moves you can make before you start trying for a family that can help ease the financial pain of having a baby.
Build Up Your Savings
Hospital costs for childbirth range from less than $2,000 to nearly $12,000. Those numbers are for women and babies with no complications. I was two weeks past my 35th birthday when my son was born and considered “advanced maternal age” so my costs were nearly double those figures despite having no other complications. Consider an emergency C-section or any number of other complications and risk factors and the price can go much, much higher. It’s difficult to predict exactly how much it will cost but talk to your doctor and your health insurance company to get some estimates.
There are also costs of outfitting a nursery and layette, feeding supplies, and probably unpaid time out of work since the U.S. is the only developed country in the world that does not mandate paid maternity leave.
All of this assumes that you don’t need help getting pregnant in the first place. A third of women over the age of 35 deal with infertility and the average cost of a round of IVF is $12,000.
2017 reports from the US Department of Agriculture indicate households with income range above $107,400 a year spend an average of $19,770 a year raising a child when they're an infant.
If your employer offers a health Flexible Spending Account (FSA) or Health Savings Account (HSA), consider maxing out your contributions. These plans allow you to set aside pre-tax money to cover medical expenses. For 2016, the maximum you can contribute to an FSA is $2,550. For HSAs, the limit is $3,350 for an individual or $6,750 for a family.
Remember that an FSA has “use it or lose it” provisions. If you have unspent funds in an FSA at December 31st, your employer may offer the option to roll forward up to $500 to the next year or allow a grace period to spend the remaining funds before March 15th of the following year.
An HSA does not have a use it or lose it rule. Whichever type of plan you have, the funds can be used to cover infertility treatments, doctor visits, ultrasounds, lab work, prescriptions, and, of course, the cost of labor and delivery. They can also be used to cover the cost of a breast pump if you plan on breastfeeding.
Check Out Your Benefits at Work
Your employer may offer maternity/paternity benefits, or they may provide FMLA leave unpaid. Only employers with more than 50 full-time employees or employers in the public sector are required to comply with FMLA, although some smaller employers do so voluntarily. If you don’t have paid maternity leave, find out if you can use paid vacation and/or sick days for maternity leave.
If your baby will be added to your employer’s group health insurance plan, ask about the time frame for getting him or her covered. You may have 30 or 60-day window to add the baby to your existing plan. You don’t want to be stuck with a sick baby and no health insurance.
Purchase Short Term Disability Insurance
If not already offered as a part of your benefits at work, look into buying short-term disability insurance. These policies help replace some of your income while you’re on unpaid maternity leave, but it’s not possible to purchase it after you’re already pregnant. Make sure you read the fine print before you purchase a policy to ensure it covers pregnancy and any potential complications.
Keep Your Spending On Baby Gear In Check
When shopping for a little bundle of joy, it can be tempting to get all the cutest, latest baby gear, but the costs can get out of hand quickly. When you walk into a store to start a baby registry, the store associate will happily supply you with a list of “necessities” that you may never need, or use only for a short time. Newborn clothing and diapers may only be worn for a couple weeks, if at all.
Talk to experienced parents about what’s really necessary and check out resale stores for deals on quality used furniture, swings, toys, and all kinds of supplies.
Start Looking Into Child Care Options Now
If you plan on returning to work after the baby is born, it’s never too soon to start researching child care options. How soon do you want to return to work? Will you be able to rely on family for daycare? Hire a nanny? Send your child to an in-home daycare or a daycare center? The cost difference between the different options can be huge, so start thinking about what your budget can handle.
Some employers offer dependent care FSAs that can help defray the cost of child care, so consider those benefits when budgeting for child care costs.
You may never be able to fully prepare for the changes that having a baby bring to your life, but taking the time to get your finances in shape beforehand can, at least, remove some of the anxiety and set your family up for future financial success.