For couples who want to be parents, it is necessary to plan ahead financially because rearing a baby is costly. They need diapers, milk, vitamins, clothing and shelter, and, as they grow up, their needs will be even more expensive, especially when it comes to education.
According to US News, the U.S. Department of Agriculture released an annual report of the expenses incurred in raising a child from birth to adulthood. In the previous year, the average cost was $245,340 and the report suggests that the number will even be higher this year.
So for couples who are expecting and will soon be parents, here is a short list of tips to prepare for the arrival of your bundle of joy.
1. Prepare a budget for hidden costs.
Obvious needs like diapers and formula milk for those who are not breastfeeding will always be in the budget. However, babies have more needs. According to Patty Cathey, a financial advisor and president of Smart Retirement in Denver, Colo., new parents often neglect how frequent smaller expenses reduce their budget.
Cathey stressed that parents should prepare for co-pays. According to the report, during the baby's first year, there will be a frequent visit to the pediatrician, which may range from $10 to $30 per visit.
Moreover, the report suggests that while parents see the need for diapers, they often underestimate the number of diapers needed. "In just that first year, a newborn can go through 2,700 diapers," she said.
2. Build a cash cushion.
According to The Christian Science Monitor even before the baby arrives, parents should start setting aside a monthly amount into a savings account. By doing so, expectant parents will not be having difficulty in adjusting their budget when their newborn is delivered.
Moreover, if there are unexpected expenses after the baby is born, the cash in the savings account can help the new parents from resorting to debts.
3. Track your expenses.
Both reports suggest the necessity of being conscious with one's expenses. According to US News, when parents track their expenses, three to six months after the baby is born, they can designate a budget on their spending for clothes, book or toys for their baby.
"Many people's budget problems are the result of impulse buying. And impulse buying often comes as the result of stress and being overwhelmed. If you have a more realistic budget, you'll be less stressed and you'll splurge less often," said Julia Kline, a Chicago-based sales trainer and marketing consultant, to US News.
Babies and budgets grow up so fast; thus, parents should apply the baby tips above to be prepared.
