Recent estimates released by the US government say that a child born in 2013 will cost parents $245,000 to care for until the age of 18. That’s a quarter of a million dollars to raise a single kid, and that figure doesn’t include the cost of college or other types of higher education.
Not to mention, that’s the average. Some families living in urban areas of Northeast — including places Nashua NH and Boston MA — are projected to spend closer to $455,000 in order to raise a child from birth to 18 years old. Along with housing, healthcare and childcare costs are two of the most expensive categories that make up that total number. Full-time care for an infant in Massachusetts can cost new parents over $16,000 per year! In other areas, monthly childcare costs can be equal to or greater than a monthly mortgage or rent payment.
With these kinds of numbers, raising kids may look cost-prohibitive to potential parents. But before future moms and dads start panicking, there is good news: you do have some say in how much room childcare costs eat up in your budget. By doing things differently from the average family and making financially savvy decisions around raising your kids, you can think about growing your family with confidence knowing that big, scary number is not set in stone.
Save Money Everywhere You Can
One of the best ways to save on your costs as a new parent? Look to eliminate unnecessary expenses and save money wherever possible — not just in areas relating to your child. Keep money spent on material items that you don’t need to a minimum, and prioritize family experiences and relationships instead. Spending time with your new nuclear family as well as your extended family not only costs less than shopping and buying new things, but it’s much more satisfying and fulfilling, too.
For more tips on saving in all areas of your budget, check out these 10 painless ways to save more money.
Use Special Savings Accounts for Childcare Costs
Try a flexible spending account or a dependent-care flex plan to save for a variety of costs for your child if one is available to you. These accounts allow you to save pre-tax dollars for many different services relating to childcare, including daycare and healthcare. They’ll also help you rack up significant savings on your tax bills.
Take Advantage of Tax Breaks and Credits You Qualify For
If becoming a new parent qualifies you for some tax breaks or credits, take advantage! Of course, the tax code is always changing. It can be difficult to keep track of what you could claim and what’s no longer applicable. Work with a financial professional who can help you identify what you can file for and how much you can claim to maximize your tax savings.
Consider Alternative Work or Care Arrangements
If it’s an option, consider changing up your work schedule or telecommuting to minimize the cost of having someone else care for your child during work hours. Consider whether one parent staying at home would be better for your family both financially and personally.
If both partners want to continue working and paying for childcare during the workweek is a necessity, look into alternatives here, too. Instead of paying for an expensive daycare, see if there are neighborhood babysitters or nannies that offer more cost-effective solutions. Try and choose a provider who can either come directly to your house or one that’s based close by your home or work to minimize your commute time and costs.
Check out this article from Working Mother to pick up more ideas on creative, flexible childcare options for new parents.
Honestly Assess Your Needs
Many new parents get caught up in having what other young parents they know have. Many families want to sell their starter home for one with more space and bedrooms. Others are convinced there’s no way their old four-door sedan or small SUV could possibly accommodate a new child, so they want to purchase a brand new car — or maybe even two new cars.
These kinds of upgrades aren’t usually necessary. But they’re always expensive. So try and take a step back from all the excitement of being a new parent (or the planning process leading up to becoming one), and have a little heart-to-heart with yourself and your partner.
Do you really need a new home with five bedrooms and a full basement, or will your first home with three bedrooms serve you just fine while your kids are young? Is a minivan with cupholders everywhere you look seriously worth $20,000 worth of debt and years of car payments?
It’s hard to say no to stuff that’s newer, shinier, and bigger than what we currently have — especially when you’re a new parent who wants the very best for little Jimmy. But choosing to upgrade your possessions (or your lifestyle) puts you in the fast lane to some expensive and probably unnecessary costs associated with raising your kids.