Financial planning is part of pregnancy preparation

When you are thinking about those tiny hands and a precious baby smile, it is hard to consider the cold, hard facts of finance. Yet it is important to consider the financial implications of having a baby. The U.S. Department of Agriculture estimates the cost of paying for 18 years of child-raising expenses is a staggering $300,000 per child, adjusted for inflation and based on a family income of $61,900 per year.

You may not make choices that result in such a huge expenditure. For example, you may:

Choose to breastfeed. Formula is estimated to cost between $1,200 and $3,600 annually, and breastfeeding will save all of that. It also provides the finest source of nutrition available to your baby.

Choose to use cloth diapers. Although there is an initial outlay and the cost of washing, it's cheaper than spending an average of $100 per month on disposables.

Make use of consignment shops and discount stores to purchase clothing, shoes and toys. You can save a lot of money on these items that children quickly outgrow.

The time to make a budget is now

Despite your best efforts, it's also true that raising a family has its unavoidable costs. So financial planning is an important part of preconception planning. If you're not on a budget now, prepare one. Write down what you spend monthly for:

Housing

Food

Clothes

Insurance

Medical costs

Transportation

Utilities

Recreation

The best way to do this is not to estimate but to actually write down your expenses every day for a month. This will give you a true picture of what you spend. Then compare what you spend with your monthly income. Is there money left over? How much?

You may have to cut back your spending in order to buy things your baby will need, such as:

Diapers

Clothes

Medical care

Food

Crib

Child care

Toys

Plan for insurance needs and reduced income

Scale back. If you're living on two incomes but plan to live on one after the baby comes, now is the time to scale back and see if you can live on one income. You may also want to save money now if you're planning to take unpaid maternity leave.

Look into life and disability insurance. Nobody likes to think about it, but planning ahead for how your child would be cared for in the event something happens to you or your partner is part of being a responsible parent, even before pregnancy begins.

Consider the cost of prenatal care and hospital care. Check into your health insurance plan to find out about co-payment, deductibles and coverage for pregnancy-related services after the baby is born, for illness and well-baby care.

Facing up to these financial realities can be hard, but planning now is the best way to figure out how to manage these costs.

Date last reviewed: October 2002.

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