Roy Benaroch, MD
You spend almost 10 months preparing for the arrival of your newborn. You buy toys, bassinets, clothes, and books -- not to mention diapers, formula, and countless onesies. But before you spend another dime on baby expenses, maybe you should think about saving a penny -- or two.
"Bringing up a child from birth to 18 years old now costs around $200,000," says Michael Farr, author of A Million Is Not Enough. "And that doesn't include school or college. For new parents, the trick is to buy smart and save wisely."
WebMD has gathered cash-saving tips and budget-planning advice from family financial experts and frugal moms who live the baby-money balancing act every day. Read on to find out how you can raise your little one while keeping your wallet intact.
"The first thing you need to do when you know you are starting a family is get your financial bearings," says Farr, who is the president of money management firm Farr, Miller & Washington in Washington, D.C.
Before baby is born, Farr recommends that a couple analyze their budget and get a good sense of what they spend their money on, how much they spend every month, and importantly, what's a necessity versus a nice-to-have.
With a little one on the way, the nice-to-haves need to be prioritized. The goal is to cut a good number of the frivolities off the list, Farr tells WebMD. By trimming the fat from your monthly spending, you can begin to prepare your bank account for the arrival of your newborn. But when you stop buying things you don't need, don't start buying things your baby could live without.
"Parents often fall victim to the hidden pressure of having to have everything for their baby, even things a newborn doesn't need," says Ellie Kay. Kay is author of Living Rich for Less. "Worse yet," she says, "they buy name-brand items that are overpriced and impractical."
Kay, a family financial expert, explains that sometimes, overzealous new parents equate love for their new child with "stuff." Then they end up with a home filled with unnecessary baby accessories.
Unfortunately, the unnecessary starts to add up. Then the next thing a mom and dad know, the nice-to-haves get in the way of what baby really requires -- daycare if a parent works, food, health care, diapers, and safety essentials.
When you look at the math, the numbers can cause sticker shock. With the cost of raising a child to 18 in the hundreds of thousands of dollars, where does all the money go, and how can such a little person cost so darn much? Here's a breakdown of the financial picture:
And for new parents, there's something else to consider. Farr says one of the most important places to put your money is in savings. The goal is to make sure you always have at least six months of cash reserves on hand.
Farr tells WebMD that in this kind of economy, when jobs get tight and the risk of lay-offs is higher, parents need to have enough money put away in case the worst case scenario happens. "Then if they lose part or all of their income," Farr says, "they're prepared, for their sake and for the sake of their child."
All told, baby expenses can run a family around $2,000 month, and that's for just the bare minimum. So spending wisely is the key to raising a baby on a budget.
"Babies add significant financial pressure to a family simply because of the physical needs of children," says Kay. "So when you're buying for a baby, you need to focus on the sheer necessities."
A good formula to follow focuses on three approaches:
Here's advice from the money experts as well as moms who spend their money on all the right things.
Buy bulk. "Buy diapers in bulk especially the first year," says Jennifer Bianco, a mother of two small children from Providence, R.I. "You go through them so quickly it will save you money in terms of cost-efficiency as well as gas. That's because it will mean fewer trips to the store in the middle of the night when you run low on diapers."
Make your own baby food. "All you need is a small food processor so you can process fruits like apples and bananas and veggies like carrots and sweet potatoes," says Bianco. "It's a lot cheaper and healthier than most baby foods found in the store."
Save now, wear later. "Buy a larger size of the current season's clothes on sale for the next year's season," Bianco tells WebMD. "It's easy to do from birth to one year when you have a good idea that your child will likely fit into that size."
Don't fall victim to marketing. "Don't go buy every kind of gear for your baby before he or she is born," says Bianco. "Lesson learned: I bought the Baby Bjorn carrier for $70 and my daughter hated it and cried so much as a newborn whenever I put her in it. Now I'm going to give it to my friend so she can try it -- for free."
Borrow for your baby. "Take advantage of your friends and family who have had babies before you," says Kara Angelone, a mother of 2-year old twins in Tampa, Florida. "Most of them will be happy to get rid of clothes or other baby gear. Or at least they'll let you borrow and then you can return the favor with some of the things you bought new. In the end, borrowing for your baby can save everyone some money."
Put your money where it matters. "Spend your money on safety items like car seats and cribs," says Angelone. "Those are places you definitely don't want to buy used -- because you don't know what you're getting and because you can't put a price on the safety of your child."
Take advantage of tax deductions. "Twenty to 35% of child care expenses can be deducted depending on your income," says Farr. "Some states offer additional benefits, so check with your tax adviser."
Tax-free is free money. "Check into an employer-sponsored dependent-care account, where you contribute an annual amount in pretax dollars to be used for qualifying dependent care expenses," recommends Farr.
Cash is king. "A good rule of thumb when you are trying to raise a baby on a budget," says Kay, "is to always pay cash. If you have cash, you know you can afford it."
SOURCES:Michael Farr, president, Farr, Miller & Washington; author, A Million
is Not Enough.Ellie Kay, author, Living Rich for Less, Palmdale, Calif.ConsumerReports.com: "Baby & Toddler: Disposable Diapers."
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