Having a baby is expensive! Your new bundle of joy is going to make a very large dent in your bank account. From the cost of giving birth to doctors visits to diapers- it all adds up. Local financial professional Mindy McIntosh talks with FOX66 WSMH and shares her guide to baby budgeting 101.
Create a Budget – The average cost of raising a child from birth through age 17 is estimated at $233,610 – or as much as $14,000 each year! It’s important to run the numbers to see how much you’ll spend on everything from child care, diapers, and other baby essentials. (Don’t forget doctor visits!) While your costs rise, your expenses may drop as well. You will likely be saving money on dinners and nights out!
Compare Hospital Costs – One of the biggest costs associated with having a baby will be the cost of delivery. Not only should you consider what the hospital or birthing center will charge, you should also determine what your insurance will cover. What is covered and what procedures cost can vary greatly, even in the same city. Find out the differences, so you can make an informed decision that fits your medical and financial needs.
Fund Your HSA – A Health Savings Account (HSA), is a tax-free account that offers you a way of saving for medical costs that aren’t covered by insurance. This money can be used to help pay your health insurance deductible and any qualified medical expenses, including those not covered by your insurance.
Consider Life Insurance – It might not be the most common thing to think about when planning for a child, but it’s important to weigh the pros and cons of buying a life insurance policy for your newborn. A permanent life insurance policy can also be used as a savings vehicle and grow tax deferred.
Many families can’t afford to save for college while they are paying for daycare. If that is the case, I recommend you start as soon as you are done paying for daycare. Take the money you were spending on childcare and roll it into a college fund. There are several ways you can do this:
- The 529 College Savings Plan is an account that’s tailor-made for parents with college-bound children. As long as the money is spent on educational expenses, it’s tax free. You can even ask family and friends to donate to the fund, instead of buying gifts on birthdays.
- You can withdraw your contributions from a Roth IRA for college expenses without tax penalty. You can also take out money after age 59 ½ and as long as it’s been in the Roth for at least five years.