8 Things to Consider When Budgeting for a New Baby

With the advent of our co-founders' second child, we're pondering the financial aspects of having a baby. 

No doubt it's easier to plan for a second baby. Most equipment and clothing can be used a second time and the pressure isn't as intense for Baby Part Deux. Worried first-time parents can easily overspend in an effort to make everything perfect. Unfortunately, with so many other expenses looming, this may not be the best time for expectant parents to splurge on a fancy crib.

Experts advise parents begin planning their baby budget as soon as possible. The first step is to sit down with all relatives involved (all who will help financially support little "Tristan" or "Aidan," that is). Discuss your needs, wishes and income. Prepare a ledger or spreadsheet detailing how much money comes into your household and what expenses you'll likely face -- both immediately and down the road. 

Your budget should include the following nine categories.

1. Infant Gear
Stroll through baby stores (like Babies R Us), discount stores (like Target), second-hand shops and surf the Internet to price the equipment you'll need. Take notes on prices to include in your budget. (Don't forget the exceptional savings of borrowing from friends or relatives.) You'll likely need:

• Nursery: Cribs and/or bassinets with mattress and bedding, glider/rocker, dresser, changing table and decorating touches.
• Baby Gear: Car seat, strollers, bedroom monitor, high chair, carrier, baby swing, diaper bag, toys and "Goodnight Moon."
• Bathroom Accessories: Diapers, wipes, a pail and infant bath tub.
• Mom: "What to Expect When You're Expecting" type books, maternity and nursing clothes, additional vitamins, nutrients and pickles.
• Feeding: Bottles and accessories, pump, formula (if needed), food and utensils. (You can save from $700 to $3,000 by breastfeeding.)
• Clothing: Buy a larger size than immediately necessary as babies rapidly grow out of the smallest sizes.

2. Child Care
If both parents must work, at some point you'll need to set aside a big chunk of money for child care. According to the National Association of Child Care Resource and Referral Agencies, the average price for full-time day care can run as high as $14,591 in some parts of the U.S. In-home care averages between $250 and $850 per week. Some employers offer a flexible spending account, which allows you to pay up to $5,000 in child-care expenses a year using tax-exempt funds.

Don't forget to add the cost of gas money, if you'll need to drive out of your way for both drop-off and pick-up.

3. Life Insurance
You'll need to upgrade your life-insurance coverage to ensure your new baby will be taken care of should -- in the parlance of insurance companies -- the unthinkable happen.

4. Wills
Now is not the time to use an office-supply store template or download an Internet form. Before Baby Ga Ga is born, invest in an actual attorney to help draw up a will covering all contingencies. 

5. Maternity/Paternity Leaveless
Not all employers graciously provide maternity and paternity leave. Calculate income lost if one or both parents take time off. Naturally, you'll need to consider the loss of income should one parent leave a job for full-time face-time with your bouncing baby boy/girl. Today's Parent has a nifty calculator that can help you decide whether staying home is a financial option.

6. Health Insurance
Babies require a great deal of medical care, both before and after birth. You'll face increased premiums and out-of-pocket expenses. If you don't have health insurance, now is the time to secure coverage or research government assistance programs. You might need to add to your budget the cost of Lamaze classes and a lactation specialist. (It's harder than it looks.)

7. New Vehicle
If you're driving a two-seater bomb, you may need to budget for a new/newish vehicle. Safety studies show infants and small children are much safer sitting in the back seat, so a sports coupe may not be your best bet. 

8. College Fund
It seems silly to start planning for college in the delivery room, but the high cost of tuition means parents need to start saving as early as possible. If you plan on sending your baby to a private school before college, remember to calculate this expense into your budget. Experts recommend parents contribute to a 529 college savings plan and/or Coverdell educational savings account.

Saving for your retirement, however, should take priority over college savings. Students have access to scholarships, loans and part-time jobs to help pay for college, but loans generally are not used for retirement.

Photo by Jon Ovington