How much do you really need?
Children are notoriously expensive. In fact, they’re probably one of the biggest investments that most of us will ever make. If you have a new baby on the way then now is a good time to start working through what you’ll need financially to make that first year or so work.
Quantifying the costs
The cost of raising a child is now around $233,610 – although obviously you don’t have to pay for that in the first year. Although the first few months with a newborn can be relatively inexpensive, it’s not just the add-on costs that are important. After all you don’t want your kids to drive you into debt or a situation where you may need a bad credit loan in order to borrow or loans with no credit check. So here are a few key cashflow-limiting factors to consider when it comes to lifestyle adjustments, including:
- The drop in salary – if you or your partner is taking time off to care for the baby then you need to take into account that you will have less income
- The pause in pension – anyone taking time out to stay at home with kids needs to bear in mind what happens to regular payments that would normally come out of salary, such as a pension
- The cost of the birth – this is almost always going to be in five figures so it’s important to ensure that you have this covered one way or another unless you want to start out on the back foot
The costs of a newborn
Baby kit. This could be anything, from a crib through to the car seat and essentials such as a steriliser. If you’re doing this on a budget, and you’re willing to borrow and take second hand then you might be able to do it for around $250. However, basic set up costs can easily spiral into the thousands if you’re buying everything new.
Bottles, dummies, toys. These may seem like small and fairly inconsequential items but these are the costs that can really add up. Over the course of the year you could spend $200 – $500 on these little items – and that’s just when you’re on a budget.
Clothes and shoes. It’s expensive to keep your baby warm and comfortable these days – especially if you get drawn into the temptation to buy those cute sneakers or the adorable onesies. If you’re just buying basics then you can expect to spend upwards of $300 a year but most people spend considerably more. Opt for second hand clothes and thrift stores wherever you can.
Diapers. If you’re using cloth diapers then you won’t have this cost to consider – although you will need to bear in mind the impact of all that extra washing. If you’re opting for disposal diapers then expect to pay upwards of $100 a month.
Formula and food. Breastfeeding for as long as possible can be a real cash saver, no matter where you stand on the breastfeeding debate. However, there will come a time when your baby needs more than this for sustenance – and that’s when you can start spending upwards of $80 a month on food and formula.