Angela Colley — It’s Complicated

Dear It’s Complicated: I’m not ready to have a kid today, but I do know I want to have at least one—maybe two—in the next few years. I’m wondering what I should start doing now financially? Ideally, I’d like to make the first year or so go as smoothly as possible.

So far, I have an emergency fund. I also contribute to my 401(k) at work and have recently started investing a small amount of my income each month. It’s not nothing, but I feel like I’m going to need to do a lot more before I really feel ready to have a baby—at least financially.

Any advice?

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Props to you for planning ahead!

Most would-be parents greatly underestimate the cost of having a baby. A NerdWallet study found more than half of hopeful parents thought it would cost less than $5,000 to cover the first year of a baby’s life. Depending on how you approach parenting, the actual cost could be much higher.

Fran Newark, mother to an 18-month-old with one on the way, calculated her costs for those first 18 months and found she and her husband spent roughly $20,000, according to CNBC. Newark was also pretty thrifty—she borrowed or bought used items from parents whose children had outgrown them.

Trouble is, there’s no magic number for what you should save. “An exact number is hard to quantify,” says Derek Hagen, certified financial planner and founder of Hagen Financial, LLC. “There’s an old saying that personal finance is more personal than it is finance. It depends on your lifestyle and your parenting style.” To get an idea of what you’ll need, start by looking at your expenses.

Think parental leave first

Before you worry about the cost of diapers, check out your employer’s parental leave plan—or more likely, your employer’s lack of a parental leave plan. Currently, only 15 percent of all U.S. civilian workers have access to paid family leave, according to the Bureau of Labor Statistics. If you are lucky enough to have a plan, it may not cover all the time you want to take off, and you may end up opting for several weeks (or months) of unpaid leave.

In Newark’s case, taking time off work was her biggest expense (or profit loss, depending on how you want to look at it). She got a mere two weeks of paid leave from her employer, followed by five weeks of short-term disability and seven weeks of unpaid leave. Her husband also lost about a month’s worth of income by taking time off for the new baby.

Many new parents assume they can rely on their emergency fund to cover a leave of absence, but that may not be ideal. “If you are using emergency fund money, you will have to work harder to get that back up to a comfortable level,” says Hagen, given all the child-related expenses for which you’ll also be budgeting. Since you’ve got time, estimating how much time away you’ll want to take, paid leave you’ll get from your employer, and how much money you’ll need to cover any unpaid leave can help you avoid dipping into your existing emergency fund.

Medical costs

If you’re lucky, you’ve got access to top-notch health insurance, and your out-of-pocket prenatal and labor-and-delivery costs won’t be too high. But that may not be the case, or it may not be the case when you’re ready to have a baby.

If you’re on an employer-sponsored plan, check now to see what might be covered. If you use the federal marketplace to get insurance, consider looking for a plan that provides good prenatal and delivery coverage when the window opens at the end of the year.

But either way, it’s probably a good idea to plan on paying for at least some of your prenatal and delivery costs out-of-pocket. A 2016 study by Castlight Health found the national average cost of a routine delivery was $8,775, while the average for a cesarean section ran about $11,525. But those costs vary widely depending on where you live. For example, a routine delivery averages $15,420 in Sacramento, California, but only $6,075 in Kansas City, Missouri. Depending on your health insurance plan and your birth preferences (using a birth center instead delivering at a hospital, for instance), you may pay way less out-of-pocket for those delivery costs. But even if you plan for a low-key, and low-cost, home delivery, you may end up with an emergency C-section. You’ll also need to factor in costs for prenatal visits and first-year pediatric care.

In the U.S., while babies will have several doctors’ visits within their first weeks of life, mothers typically get just one follow-up with their ob-gyn six weeks after birth. In the interest of better supporting both mother and child, you may want to budget for non-medical wellness in the weeks after birth—things like a postpartum doula, physical therapy, healthy meal service, even a night nanny—to help stave off postpartum depression and promote physical healing. And in the case of a birth-related injury (these are common, but often left untreated), you’ll want to be secure knowing either your insurance or your savings account will cover treatment.

Child care

According to the NerdWallet study, 48 percent of would-be parents think diapers and wipes are the biggest expense in the first year, but the $743 you’ll pay on average is nothing compared to the cost of child care. For that, you’ll pay an average of $8,059 for full-time care in the first year.

However, just like with all things baby, what you’ll pay varies widely based on where you live. To get an idea, ask friends and co-workers what they pay or call reputable daycare centers. One expectant mother we know even proposed that her workplace allow infants to come to work during their first six months of life, and they took her up on it. Worth a shot, if you ask us.

You may be able to cut costs by enlisting family members to help or setting up a nanny share with friends, but it is still a good idea to save as much as possible for child care ahead of time. And while you’re at it, start touring and interviewing child care centers and providers. It’s rough out there.

Baby gear

The new-parent-industrial-complex tells us that babies need a lot of stuff, but this should be one of your last priorities, financially speaking. Take solace that at least for the first few weeks, all a baby really needs is a loving parent, nourishment, sleep, and diapers. To further figure out what’s worth splurging on and what can be bypassed, we love this hilarious article in which two recent parents evaluate the usefulness of different baby products.

Having a baby gift registry is a great way to curb your gear costs, and one in which your friends and family will likely gladly participate. Be warned, though—they will want to buy your infant nothing but cute hats, books that are not quite age appropriate, and a menagerie of stuffed animals. Try to gently steer them toward more practical items (at your peril). But, there are other ways to be frugal other than hoping your aunt springs for an Uppababy stroller.

While Target, Buy Buy Baby, and others are likely flooding you with adorable ads for the latest, greatest infant necessities, your first baby-gear stop should be secondhand. We once admired a friend’s beautiful nursery, and she proudly divulged she’d sourced everything from Craigslist, spending no more than $300 for the entire room’s contents. Many people use their baby gear for just a short while before the child outgrows or tires of it, so you can find low prices on used things still in very good condition. From cribs to books to strollers, there are likely several worthy options via online resale sites, local groups, general thrift stores, or, depending on where you live, specialized consignment stores just for children’s items. Safety experts recommend you purchase your car seat new, however. (Unless you are gifted a used one from a very trusted source who can confirm it’s not been in a car crash.) Baby gear also runs on sale often, so you can stock up when prices are low.

Cost of living

Finally, don’t forget your cost of living. “Once you have a child, your expenses will go up and the amount of money you have in the bank should go up appropriately,” says Hagen, who recommends listing out recurring baby-related costs and configuring a new budget with that information. The silver lining is that while new costs will certainly arise, you may find you spend much less on things that were previously mainstays of your child-free existence. Dining out, movies and concerts, alcohol and cannabis, fancy clothes, and action-packed vacations all tend to fall by the wayside once a kid arrives on the scene. That may sound like a bummer, but trust us, you’ll barely care once you’re staring into your child’s eyes for the first time.

Still, aim to up your savings and increase your emergency fund to reflect your new family size. “The new emergency fund should include six months (give or take) of the new monthly expenses, which will be higher. You may be able to get away with less if you’re working with two incomes, and you might need a little more if you’re in an industry where it may be harder to find a job,” Hagen says. Your future new-parent self will be eternally grateful.