Family, Kids & Relationships

Saving for baby: Tips for managing the costs of having a new baby

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As inflation continues to impact families across the country, the cost of raising a child to the age of 17 has skyrocketed to over $300,000 — an increase of over nine percent from two years ago. This increase works out to $18,000 per year of additional costs to raise a child. 

According to the Brookings Institution, it will now cost the average American family $310,605 to raise a child until the age of 17. This figure was calculated using the consumer-price index for basic needs like food, clothing, educational expenses, and toys. While there are ways parents can combat rising costs — by doing things like researching tax savings available to families, using money-saving grocery hacks, and fighting for legislation that offers families the supports they need — there’s no denying that raising kids is expensive.

Before bringing a new child into the family, it’s a good idea to set out a plan to save money and plan for the financial transition well in advance. This guide can help your family identify the costs of welcoming a new baby, and make a plan to save for the future.

The costs of welcoming a new child

The first major costs associated with having a new baby are the healthcare costs during pregnancy, labor, and delivery. According to the Kaiser Family Foundation, the total cost of pregnancy, delivery and postpartum care ranges from $14,768 and $26,280. If you have health insurance, most of this cost would be covered, with out-of-pocket expenses averaging between $2,655 and $3,214. Keep in mind that these expenses vary depending on the type of birth, with C-section births costing more than vaginal births.

Of course, even the path to pregnancy alone can be an extremely expensive process for those with trouble conceiving through traditional means. In vitro fertilization (IVF) is the most effective fertility procedure, and a full cycle of IVF can cost up to $30,000. Some people are even seeking jobs that offer fertility benefits to help cover these costs, which are often not covered by health insurance. 

Adoption is another route for welcoming a new child to your family. Depending on the type of adoption you pursue, the process can cost anywhere from $15,000 to $50,000. Depending on where you live, however, you may have the option to foster-to-adopt, in which you work with the local foster care system to place a child in your home, and then formally adopt them. The costs of this process may be covered in part or in full by the local government and state agencies. 

The costs of raising a child

The majority of the $310,605 price tag the Brookings Institution estimates for childrearing represents housing costs, which takes up nearly a third of the total cost of raising a child. Food tends to be the second largest expenditure, at 18 percent of the total cost. Child care and education expenses and transportation costs are close behind, with 16 percent and 15 percent of the total cost respectively. 

The remaining costs include health care at nine percent of the total cost of raising a child, clothing at six percent of the total cost, and miscellaneous expenses like entertainment making up the remaining seven percent. These costs can vary depending on how many children are already in the family — additional expenses tend to decline with each new child. There are also regional and socioeconomic variations in the costs of raising a child. 

Saving up for a new child

Getting a head start on financial planning for your growing family can help you prepare for any emergencies or unexpected costs that might come up. This step-by-step guide will help you plan your budget and financially prepare for your new child.

  1. Make a new budget: Track your expenses for several months before factoring your new child into the budget to see where you may need to make adjustments and start cutting back. Then, create a new budget with money allocated for new expenses that will come up as you prepare to welcome your new child, like doctor’s appointments, clothes, and baby supplies.
  2. Assess your benefits: If you get benefits through your employer, check with them about what options you have available to you as you prepare to welcome a new child. You may have paid or unpaid leave options for taking time off to recover and bond with your new baby when they arrive, whether your little addition is your biological offspring or not. You can use benefits like a flexible spending account (FSA) or a health savings account (HSA) to pay for expenses related to pregnancy, delivery, postpartum care, and other health care expenses throughout your child’s life. It’s also a good time to check with your health insurance provider about which costs will be covered. 
  3. Boost your savings: It’s a great time to open a high-yield savings account to use as an emergency fund. This is a great place to deposit any cash gifts or extra money that you can use in case of unexpected expenses, if possible. It might also be useful, if you have the means, to open a savings account for your child where you can deposit a little bit each month to use when they get older for things like buying a car or going to summer camp.  
  4. Boost your insurance: Before you embark on expanding your family, it’s a good idea to get life and disability insurance to protect your family in case of a worst-case scenario. Check first with your employer to see if they offer any disability coverage, which pays a portion of your income if you are sidelined from work. You may also have group life insurance through your employer, which will provide some coverage, though individual term life insurance will cover more expenses for your family. You should also get your estate planning documents in order before your baby is born.

Of course, not every family will have the means to save up a lot of money before having a new child. If your family is low-income, there are plenty of organizations and government programs that can provide financial help. Reach out to programs like WIC, the Pregnancy Assistance Fund, or the March of Dimes to get more information on assistance programs. Taking these steps before you welcome a new child can set you up for a less stressful, more secure future with your growing family. 

Mckenna Saady is a staff writer and digital content lead for ParentsTogether. Before working for nonprofits such as the Human Rights Campaign and United Way, Mckenna spent nearly a decade as a child care provider and Pre-K teacher. Originally from Richmond, VA, she now lives in Philadelphia and writes poetry, fiction, and children’s literature in her spare time.