Can We Afford a Baby?

There’s a saying that goes, “If everyone waited until they could afford children, no one would have them.” Having and raising a baby is not cheap. The costs of gear, clothing, diapers, and food/formula are high, and get higher each year. Unless you have a family member who can care for your baby at little or no cost, then your budget will be impacted either by the cost of childcare (if both parents return to work) or the loss of an income (if one parent stays home to raise the child).

Consider these important details to get a clearer picture of how this major life decision will affect your financial health.

One less income — Consider the net income you would lose if one parent stayed home. Couples often overestimate the effect of losing a salary because they look at gross income, not after-tax take-home dollars. Factor in any incidental costs of working, including gas for commuting, lunches eaten out, clothing and dry-cleaning bills, higher taxes, and any other work-related expenses to calculate the true impact of a second salary.

Choosing to use daycare — If both parents plan to go back to work, your budget must include the cost of childcare. Contact childcare centers, nanny agencies, and in-home childcare providers to inquire about fees.

Supplies —In addition to the crib, car seat, and stroller, there are monthly expenses, such as diapers and possibly formula, that should be factored into your budget. Borrowing or buying used baby gear and clothing can offset some of the expenses.

If the math doesn’t quite add up, you might need to look at cutting fixed expenses, such as refinancing mortgages or car loans, or by moving to a less expensive home. Also consider talking with your Human Resources department about adjusting your tax withholdings and opening a Flex Spending Account (FSA).

If you still have questions about this major life decision, it’s worth your time to make an appointment with a financial planner or adviser who can suggest ways to make your budget more workable.