So you’ve decided that you’re ready to expand your family. This is exciting, but you need to keep one thing in mind: a child can cost up to $15,000 per year to raise.
Most people aren’t ready to spend that kind of money. You’ll need to start budgeting and making some serious lifestyle adjustments. Do you need some budgeting advice to get you started?
We’re here to help. Keep reading to learn our top budgeting advice for new parents (or soon-to-be parents), so you can start saving.
First: Know How Much Money You’ll Need
Many parents underestimate the cost of raising a child. They may know the basics, but they don’t consider the small things that add up over time. Remember that children have expensive needs, but if you want to provide the best possible life for them, you’ll have to give them the occasional “extras” you never got to have.
When you start budgeting, it’s a good idea to break down all of the costs associated with taking care of your child through adulthood. Here are a few of them.
The First Year of Life
The first year of a child’s life can cost you thousands of dollars—and that’s only on necessities. Yes, you may have some resources given to you when the child is born, but after you leave the hospital, you’re on your own.
Consider diapers first. Babies can go through 700 diapers in their first three months. While the number of diapers will go down over time, you can still expect them to use over 2,000 diapers within their first year (though you can mitigate this problem if you try the infant potty training method).
If you exclusively breastfeed your baby, this will cut down on some infant costs. If not, you’re also going to be paying thousands of dollars on baby formula.
While ideally, your friends and family members will help you with baby supplies, you’ll need several expensive items, such as a crib, a stroller, and plenty of clothes.
The cost of these items will vary. While you’re waiting for your baby to arrive, look around at local stores to see the average price of the items you need during your baby’s first year.
Raising a Child to Adulthood
The first year of a baby’s life is expensive, but it pales in comparison to the next seventeen years of your child’s life. It’s never too early to start planning for your child’s future.
Remember that you’re adding a whole new person to your family. This means you need an extra plate of food, an extra wardrobe (that’s constantly changing as your child grows), and more.
Your child will need toys, books, daycare, and babysitters if you can’t stay home with them. These costs will ebb and flow as the child ages, but there will always be something new to pay for, even for a low-maintenance child.
Other Expenses
Remember that your child will likely want to go to college in the future, or at least some form of a trade school. Your child may also need a car while they’re still living with you, and while they should help pay for that on their own, it may be in your best interest to help them (especially if they’re using their car to get to work).
Younger children may need supplies for extra-curricular activities or sports. For example, they may need money to pay for field trips or school uniforms. You always need to have money set aside for unexpected expenses.
Don’t Forget Other Financial Priorities
Your baby might be your top priority at the moment, but you need to remember your other financial preferences, too. How much money do you need to maintain a good quality of life for your entire family?
You’re still going to need to save up money for retirement and emergencies. If you know that you’re going to need a new house or car for your growing family, you need to factor this into your budget.
You also can’t forget your necessities. While you can take steps to reduce your expenses (more on that later), you still need to factor in the costs of food, clothing, transportation, and the occasional “extra” when you’re making your baby budget.
It might be in your best interest to hire someone with experience in financial planning for new parents who can help you break everything down.
Start As Soon As Possible
If possible, you should start setting aside money for your future child before you even start trying for a baby. Give yourself as much time as possible, so you’re not in a rush later on.
If you and your partner know that you want a baby, consider how much money you’d save just by putting aside a portion of your paycheck every week for an entire year (assuming that you start two-to-three months before you start trying for a baby).
This is also an excellent time to start making extra money if possible. Ask for a raise or find a new job. It’s currently a worker’s market.
If possible, get a side-hustle or find a stream of passive income. Consider taking out a loan to start paying off some of your debt to improve your credit to make things easier when the baby arrives.
The 50/30/20 Approach
If you’ve never really had to make a budget before, the 50/30/20 approach is a great place to start. This means that 50% of your money should go toward necessities, 30% toward “extras,” and 20% toward savings.
In this case, we’re going to modify the approach. Consider removing 5% each from necessities and “wants” (more on that later) and creating an extra 10% section for “baby budget.”
We’ll talk about cutting down your expenses as much as possible so you may be able to reduce your “necessities” costs even more.
Cut Back on Expenses Before the Baby Arrives
You’ll need to live more frugally before the baby comes (especially if one parent doesn’t plan on returning to work). Parental leave will give you a bit of a cushion, but if one parent stops working entirely, you’ll be living on half of your regular income.
Start adjusting your lifestyle months before the baby arrives to see where you can reduce your costs and start budgeting for a newborn.
Lowering Your Grocery Bill
This is a tough one. Groceries are more expensive than ever. Many people are already eating at home to lower their food costs, but what else can you do?
First, always look for coupons. Many grocery stores will have loyalty plans that allow customers to get free digital coupons for the items they buy most often. Check for coupons at various stores before shopping to ensure you get the best deals.
Opt for store-brand if possible. Store-brand options are almost always more affordable.
If your grocery store has a bulk section, take advantage of it. Buying bulk staples (like rice, pasta, beans, nuts, and baking ingredients) can save you hundreds of dollars per year.
Buying Fewer “Extras”
It’s time to cut back on “fun” purchases. Sure, you can still buy things that make you happy and go on the occasional trip, but don’t overdo it. You need to adjust to living more frugally.
Cancel subscriptions that you don’t use too often. Don’t buy new clothes unless you need them. If you want to take a trip, look for affordable flights or go somewhere nearby.
Look for Affordable Alternatives
As we mentioned, your new baby will cost you a lot of money during their first year of life. Look for affordable options when they’re available.
Check local “Buy Nothing” Facebook groups for baby supplies. Many parents are happy to give away baby clothes and toys they no longer need. Having been through it all themselves, they’re well aware of the struggle new parents face when buying these things.
Shop at secondhand stores or ask friends and family members if they have hand-me-downs. This will make a huge difference (and it’s the more environmentally sustainable option).
Start Investing for the Baby
While savings bonds are no longer available for Canadians, there are other ways that you can start investing for your baby. Again, you should start this as early as possible, so your investment has a chance to grow.
Consider a tax-free savings account or a registered education savings plan. Your money will grow over time, and it will be ready to take out when your child heads to college.
You could also invest in a mutual fund to have a professional take care of your money while it grows (for a small fee).
Try This Helpful Budgeting Advice Before Your Baby Arrives
New parents need all of the budgeting advice that they can get! These tips should help you start off on the right track. Having a baby (and raising a child) is expensive, but it’s within your reach if you plan ahead and budget wisely.
Are you in need of a loan right away to start getting your finances in order? At 24Cash.ca, we want to help you. See how it works and request a loan today.