Tag: Frugal Finance Management

How Much Does Having a Child Cost and How To Cut Costs

Deciding to have a child is a very big, life altering decision. It not only affects your everyday life but your finances too.

The average amount that it costs to raise a child annually varies from between $12,000 – 13,000, and it goes up each year with inflation.

But, there are more expenses incurred in the 1st year of having a child. How much does it cost for that 1st year and how can you cut costs?

CHILD BIRTH

The most expensive part of having a baby is the actual birth process. The costs completely depend on:

  1. Vaginal birth or c-section
  2. Insured or not
  3. How much your insurance covers
  4. Which state you live in

While these are a lot of different variables, here are the average costs in each category:

  • Vaginal birth with insurance –  $4,900 – $10,700
  • Vaginal birth WITHOUT insurance – $9,015 – $19,800
  • C-Section with insurance – $7,500 – $15,000
  • C-Section WITHOUT insurance – $12,600 – $28,500

Total range of just giving birth – $4,900 – $28,500

This is a pretty wide spread and should give you a whole lot to think about right out of the gate.

HOUSING

Buying a home can have a pretty large price tag, especially for things that you might not have even thought about. First and foremost is the down payment. This can vary depending on which type of loan you qualify for, but the average amount required for a down payment is 10%.  However, most banks prefer you to put down at least 20% in order to forgo the mandatory PMI. Just something to keep in mind before you decide to purchase a home.

While there may be more up front costs buying a home, it could still potentially cost you less overall. Owning usually gives you more space for the same amount, or less money as renting a smaller place. Plus, you get the equity if you own and you don’t if you rent.

As an added bonus, once your house is paid off, it will then be considered an asset. One that could potentially help you as you get older and start thinking about retirement.

The buy vs. rent decision is a very personal one. So if you aren’t sure which one is the best for your family, then check out this rent vs. buy calculator. Hopefully, it will help you on your path to cutting costs.

FOOD

Food costs can be one of the biggest parts of a monthly budget. While you may not think it will directly affect you immediately, it certainly can. Because with a new baby is in the house, the food costs will go up.

The 3 major things affecting this are:

  1. Breastfeeding
  2. Formula
  3. Solid Food

1. BREASTFEEDING

Breastfeeding usually requires an extra 500 calories per day, just to account for the extra energy needed to produce the milk. A an average of 20% more than you were eating before, you should add an extra 20% into your food budget just for you.

If the average grocery bill for 2 is around $500, then that translates to approximately $250 per person. With the mother requiring 20% more food though, that will be an extra $50 which = $600 per year in increased food costs.

2. FORMULA

Formula feeding can vary with regard to costs depending on how much your child eats and which type of formula you use. But the average costs to formula feed are between $1,138 – $1,188 per year.

3. BABY FOOD

Baby food runs close to $1 per jar. Most babies eat anywhere from 2 – 5 jars a day, depending on their age. That means you could be spending an extra $2 -$5 a day.

That is an extra $60 – $150 per month and $720 – $1,800 per year! A great option to cut costs here is to buy a blender and make your own baby food.

CHILD CARE

Child care can be one of the biggest expenses, aside from the actual birth.

The average a married couple spends 10% of their budget on child care expenses alone. But if you happen to be a single parent, it’s even worse. The number now goes up to 36% of your budget.

This means the average cost of one child, under the age of 1, can be anywhere from $10,000 $20,000. This may be a good reason to think about staying home and working on side hustles instead, as an alternative option.

TRANSPORTATION

A lot of families decide that they want to upgrade to a minivan or an SUV when they begin to think about having a child.

But, switching from a sedan to an SUV or a minivan can cost you up to 50% more. But that doesn’t even include the increased car insurance costs associated with switching to an SUV or a minivan. So keeping your older car, especially if it is paid off, can really help you cut costs.

HEALTHCARE

Adding a child to your healthcare plan will certainly increase your costs. So much so that the range can be anywhere from $250 – $400 extra per month or $3,000 – $4,800 more per year.

This doesn’t even include the higher deductible you will have due to the increased family size. Checking around for cheaper payments with a higher deductible, that covers preventative care visits, may be a good way to help cut costs.

CLOTHING & MISC

Babies require a lot of clothes because they grow so fast and they like to have accidents. The average cost for baby clothes runs around $60 per month, but this depends on your state and income level. However, this doesn’t include other things you need for them such as:

  • Bedding
  • Blankets
  • Books
  • Hairbrush
  • Haircuts
  • OTC medicine
  • Stuffed animals
  • Toothbrush
  • Toothpaste

If you add an extra $40 into your monthly budget, this should help cover these extraneous expenses. This makes the total for this category an extra $100 per month or $1,200 per year.

overall costs

Let’s recap the added cost breakdown:

  • Child birth = $4,900 – $28,500
  • Housing = Variable
  • Food = $1,320 – $2,988
  • Child care = $10,000 – $20,000
  • Transportation = Variable
  • Healthcare = $3,000 – $4,800
  • Clothing & Misc = $1,200

That is a grand total (on average) of $20,420 – $57,488!

Even though having a child could potentially cost you this much, it doesn’t necessarily have to. Proper planning and forethought are key to helping you cut costs when you have a child.

How much do your children cost you extra a year? Where have you found to cut costs?

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