Bringing Home Baby: The Budget Impact for First Time Parents



Health Care

Expect to be out-of-pocket $10,000 during your baby's first year.

Having a great health insurance plan in place before you conceive can help alleviate some of the financial stress of a baby's health care, but chances are you will still have some out-of-pocket health care expenses. New babies have a lot more regular checkups than adults. Expect to take your baby to the doctor at every two months for the first six months of life, and every three months after that until she reaches 2 years – and that's just if she is healthy. You will have more trips to the doctor if she gets sick. Most health insurance plans involve a co-pay for doctor's visits, so you'll need to budget in the extra cost. Health insurance plans typically consider newborn care to be part of the care of the mother, but you'll likely have to upgrade your policy to a more expensive family plan to cover your baby once she passes from the newborn stage.

 

Life Insurance

You might not need much life insurance when you're footloose and fancy free, but things change when you have a baby on the way. "A new baby means new responsibilities," says Elaina McKnight Shaver, marketing coordinator at McKnight Insurance Group. "You need to make sure you have enough to meet the added expense of providing for your child in the event of your death." How much additional life insurance you need depends on a multitude of factors, such as your lifestyle and the number of people who will depend on it. You typically can save money by going with term insurance over whole life, since it is much less expensive.

Shaver suggests resisting the urge to buy a large life insurance policy to cover your new baby's life. "Life insurance is designed to protect your family against financial loss if you pass away," she says. "A child's death is tragic, but it typically won't affect your family's income. If you want to buy life insurance for your newborn, keep it to a minimum to cover funeral expenses, and use any extra money you would have paid in premiums to invest in your baby's college fund."

Living Expenses

A first baby means you have a new mouth to feed and a new body to clothe and a new person to make room for. The day-to-day living expenses for your new family will expand, but this is one area where you at least have some flexibility. For example, it's much less expensive to breast-feed than it is to buy formula. You have to buy a car seat, but there are extensive choices when it comes to price. You might need a different car to accommodate that car seat, but that doesn't mean you need a second car, or a new car. You might be able to make a lateral trade for a different, roomier car without being out-of-pocket.

Then there is the whole question of cloth vs. disposable diapers. Newborns typically need to be changed eight times or more each day. The jury is still out on whether one is less expensive or kinder to the environment than the other, but whichever way you choose, you'll likely spend at least $70 per month on them, according to the Baby Center website.

College Fund

You want the best for your baby, and for many families that means sending her to college when the time comes. Before you pour all of your extra money into a college fund, it's best to consider your entire financial picture. If it comes down to a choice between funding your retirement account and saving for your baby's college education, your retirement account should win, or you should at least split your contributions between your retirement account and your child's college fund. One good reason is college financial aid. When it comes to qualifying for financial aid, your assets weigh less heavily than your child's assets, according to the USA Today website.

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