The Financial Impact of Starting a Family
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Starting a family with your partner can be a beautiful thing — but it can also be an expensive thing. The cost of raising a child will vary due to differences in geographic location or parenting philosophy; however, one thing is sure: it will come with unexpected expenses.
From small costs that add up (like diapers) to additional health insurance costs, the financial impact of a growing family can be anticipated but not fully accounted for. Even so, there are a few areas of your personal finances to start thinking about as you consider starting a family.
Taking a look at the list of financial considerations below and weighing your wants and needs for your child against your household income is a great first step as you consider what additional family members may do to your finances. Keep reading for more info on the budgetary impact a child has on new parents.
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Costs of having a child
There are a wide range of costs associated with having a child. Here are some of the most common ones, and how much you might expect to pay for them.
Medical
Even if you have solid health insurance, there are going to be costs associated with having a child. Here are some of the most common scenarios.
Prenatal costs
Prenatal care includes regular check-ups during the pregnancy, ultrasounds, additional tests, and prenatal supplements or vitamins you may choose to take. Each OBGYN appointment during pregnancy could range anywhere between $90 and $500, with special tests (such as an amniocentesis) costing up to $2,500.
In come cases, prenatal costs can get very expensive if you and your partner are struggling to conceive. In situations where IVF (invitro fertilization) is being used, you may pay close to $12,000, not including medications, per IVF cycle. Each additional cycle comes with an additional $12,000 price tag, so these costs can really add up quickly.
Delivery costs
The cost to actually have your baby delivered can also range depending on factors like epidurals, and whether your baby is delivered naturally or via a Caesarean section. Obviously, some of these things can’t be factored into your financial planning; however, just knowing some of the average costs in the United States can help you adequately budget for them.
For example, a vaginal delivery may cost you $14,768 without insurance (and $2,655 out-of-pocket for those with health insurance). C-sections, on the otherhand, may cost $26,280 without health insurance and $3,214 out-of-pocket.
Postpartum costs
Like most medical costs, postpartum care can vary in price depending on your health insurance, where you live, and what postpartum care is necessary. Postpartum care for the mother or postnatal care for the newborn can range from labs and diagnostic testing to psychiatry, surgery, medicine, and immunizations.
Some research shows that most postpartum care actually occurs more than 60 or 90 days from childbirth, so these are the sorts of costs that you may not immediately face but should still be expecting to budget for. On average, these costs can total anywhere between $2,900 and $4,600, depending on your age in geographic location.
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Childcare
Childcare is another cost that you’ll need to think about when considering the financial impact of starting a family. While some middle-income families decide that it makes more sense to have one parent stay at home in order to cut down on child care costs, others can afford daycare until their children are in school.
Daycare can range from $1,000- $2,500 per month in cities like Chicago, and even in more rural states like Nebraska, can cost about $13.50 an hour. Babysitters and nannies can range anywhere from $12 to $20 an hour depending on where you live and your sitter’s qualifications.
Keep in mind that having a child that needs adult supervision also means that date nights you and your partner might take get a bit more expensive, too. While it’s important to make time for connecting as new parents, it can get harder to make that time when a nice dinner out costs an extra $15 an hour.
School
Many parents opt for public school once their children are ready for pre-school or kindergarten, and this can help cut down on childcare costs. After all, as a tax payer, you’re already spending some portion of your income on public schooling, so it only makes sense to enroll your child in a public elementary, middle, or high school.
If, however, you decide that you need to enroll your child in a private school, tuition can fluctuate wildly. In 2021, the average cost of a private K-12 school was $12,350 a year. This means that if your child attends private school from Kindergarten to only eighth grade, you can expect to spend, on average, over $110,000. Keep in mind that that’s just the average, though. The Connecticut boarding school Choate Rosemary Hall is anywhere between $51,000 and $65,000 a year!
Of course, once your child is enrolled in school, even if it’s a public school, there are other costs associated with attendance. These can range from school supplies ($50-$100 a year) to extracurriculars. As your child gets older, other costs like outfits for school dances or gifts for teachers will also crop up. And, if you decide to enroll your child in a private school, you’ll likely have to budget for school uniforms in addition to tuition.
Food and clothing
Aside from child care, there are other major costs associated with feeding and providing other necessities for your child. As a baby, diapers and other baby supplies like bottles, teething rings, car seats, and strollers can all add up. The average cost of disposable diapers per month is anywhere between $70 and $80, meaning that in the first year of your baby’s life, you can expect to spend close to $1,000 in diapers alone.
Clothing, food, and toys are the main two other costs that you can expect to pay for a baby. If you are breastfeeding, you might save on formula, but it will also require you to spend money on pumping supplies. Formula can get pricey, but some babies require it due to digestive sensitivities as newborns. For example, if you are using powdered formula exclusively, you may wind up paying anywhere between $400 and $800 each month.
If you’re trying to reduce expenses in this category, hand-me-downs and baby showers are a great way to save on some of these costs. Some baby shower lists allow attendees or gift givers to sponsor a month of diapers, and bigger ticket items like car seats and strollers can often be asked for at showers as well. Networking with other recent parents ahead of birth in-person or online can be a good strategy when it comes to lowering the cost of clothing through second-hand options.
Household costs
In addition to costs that are directly tied to your baby or child, it is not uncommon for other household costs to increase when you start a family, too. This only makes sense since you have one more mouth to feed, but that also means that your utility usage will increase. Ask any parent of a precocious middle schooler how much their gas consumption increases during sports season or dance rehearsals, and you’ll find yourself paying more for transportation, too, with a child.
How to adjust your budget
If you’re thinking of starting a family, you need to be on a written budget. Whether it’s in an Excel spreadsheet, uses fancy software like YNAB (You Need A Budget), or is done in a notebook with paper and pen, your budget is going to help you really determine what the financial impact of having a child will be for you and your family. Here are some things to keep in mind as you adjust your budget.
Estimate new expenses
As you look at your month-to-month expenses, start figuring out what categories you can anticipate will go up. This can help you better determine how much you’ll need to reign in your budget and in what areas. Starting a family is a big change and can be scary. Knowing that you have a financial plan for how to deal with this new addition to your life can give you the peace of mind you need in order to rest easy at night (unless you’re in the middle of sleep training).
Generally speaking, adjusting your budget has to do with reallocating your income and not taking on extra jobs in order to afford having a child. Even so, if you do fine-tune your budget and discover that you’re going to have some sort of shortfall, it’s best to identify that ahead of time and figure out how you can address that problem before you give birth.
Expect changes
As you might have guessed from the above list, there are going to be some new expenses that you didn’t have to think about prior to starting a family when you have a child. Even a simple date night or trip to a wedding might necessitate hiring a sitter or having family come in from out of town to watch your kid.
If you or your partner choose to become a stay-at-home parent, you’ll need to account for that reduced income in your budget. While it could equate to major cost savings in the long run, switching to a single-earner household puts more pressure on external factors like job security in order for you and your family to make ends meet. If you’re planning on making this switch, it’s a good idea to beef up your emergency fund in your savings account before you have your child.
The biggest change to your budget is going to be the shift in priorities. In order to make room in your finances for a kid, you’ll need to make some sacrifices. For some families, that means eating out less and taking fewer vacations. For others, that means reducing contributions to retirement accounts or not saving for your child’s college education.
It’s important to be realistic about what sort of lifestyle you can afford for your child, since it’s tempting to do everything possible to give them the world.
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Test run your budget
As you start trying for a baby, it’s a great time to get ahead of some of these new expenses in your budget. By starting to save for future expenses in the present and eliminating unnecessary expenses before your child arrives, you’ll feel less of a rude awakening when you have your baby.
Giving your new budget a test run before your child is born can also give you training wheels to test out certain sacrifices. Maybe you thought you could forego your gym membership, but really like the included yoga classes. Switching things around and adjusting your priorities ahead of childbirth can give you valuable information as a soon-to-be parent.
How to plan for the future
So much of starting a family involves planning for the future. When you start to dial in your expenses and really get intentional about your goals for your child, you can really make headway. Here are two important aspects to start thinking about and saving for today.
Save for college
College is a hotly debated topic these days. Parents generally fall in one of the following camps when it comes to their perspective about higher education:
- They want to be able to pay for their kid’s college completely, a luxury they likely weren’t afforded
- They want their child to pay for college completely
- They’re willing to take out student loans with their kid and share the burden
- They will only pay for a state school
- They expect their child to apply for (and receive) as many scholarships as possible in order to make college affordable
Regardless of where you stand in terms of the above approaches, it’s important to talk with your partner and make sure that you’re on the same page. From there, you’ll want to make sure that you communicate with your child often about your expectations about college and finances. Starting early will allow you to make the most of whatever you decide, since opening up a 529 account for your kid is best done as soon as possible in order to earn the most interest.
There are plenty of resources online and in the library when it comes to scholarships and other alternative ways to pay for school. Especially if your child is considering pursuing a graduate degree or medical school, there’s nothing wrong with going to an in-state school, since these are often more affordable and provide just as solid a foundation for undergraduate students. Communicating with your partner and your child is thus a crucial component of setting expectations and managing your finances when it comes to college.
Estate planning
When you have a child, you have a new dependent — and all of the responsibility that comes with it. While nobody likes to think about estate planning, it’s important to make a plan for what should happen if something happens to you and your partner before your child is a legal adult.
If you haven’t already, you’ll want to write a will and choose guardians for your child. You may also want to talk to an advisor in the financial services sector about the pros and cons of setting up a trust for your child. It’s also important to adjust you and your partner’s life insurance policies so that they include provisions for your child. All of this work can feel scary or morbid; however, it’s crucial that you get these tasks done as soon as possible as a protection in case something bad does happen to anyone in your family.
The bottom line
As you can see, the financial impact of starting a family can be quite large. What’s more, the child tax credit for qualifying dependents in the United States in 2023 is only $3,733, which barely covers the cost of two or three months of daycare in most states. If you are planning on expanding your family, you’ll really need to dial in your family finances in order to make sure that you don’t overextend yourself.
In addition to an increase in health care costs and everyday necessities, it’s also important to think about the type of life you want to provide for your child. You may never have had any interest in going to Disney World, but if your kid wants to go to the happiest (and most expensive) place on earth, will you feel obligated to do so? From vacations to extracurriculars and college, it’s important that you and your partner are on the same page about what is philosophically important and financially possible for you to provide your child as parents.
Looking at this brief overview of costs associated with starting a family, it can be easy to get discouraged about having a kid. While the current economy certainly contributes to some anxieties around starting a family, it’s hard to put a price on a parenthood. If you talk to most parents, they’ll say that raising a child is one of the most rewarding things they’ve ever done. For those reasons, it may be worth figuring out how to make starting a family make financial sense.
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Writer
Brent Ervin-Eickhoff is a Chicago-based writer, stage director, and filmmaker with a background in digital marketing and content creation. In addition to Joy Wallet, Brent has written for Complex, Volkswagen, HowlRound, Picture this Post, and Third Coast Review, among others. He currently serves as the Associate Director of Marketing for Content Creation at Court Theatre at the University of Chicago. Brent graduated from Ball State University with Academic Honors in Writing.
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