Sticker shock happens all the time. But more and more millennial parents are experiencing it with the costs of raising children.
According to a Merrill Lynch report, the average cost of raising a child until age 18 in America is more than $230,000. The same report also states that 90 percent of parents were surprised by how much more money they spent after becoming a parent. While it’s true that raising kids is a lifetime commitment, preparing early can make the journey more financially (and emotionally) rewarding.
Here’s what to expect when you’re expecting — and beyond.
1. Pregnancy
Whether your pregnancy came as a surprise or was planned, your medical bills will start to add up quickly. Prenatal care is super important for the health of both mama and baby, so take some time early on to review your insurance plan to make sure it’s the right fit and to avoid any financial surprises.
During pregnancy, periodic lab work is necessary to screen for common birth defects, gestational diabetes and more. Want to see your little one? Ultrasounds can cost upwards of hundreds of dollars each, and insurance typically only covers the main ultrasound between weeks 16-20. And don’t forget the hospital bill once your bundle of joy arrives. Depending on where you live and the coverage provided by your health insurance, your labor and delivery bill could be anywhere from $8,300 to $19,600 in the state of Illinois, according to Business Insider.
Pregnancy complications, fertility treatments or your baby’s stay in the neonatal intensive care unit (NICU) can also be astronomical in terms of costs. Certainly we all hope things go smoothly, but it’s best to be aware.
PRO TIP: Check out our Save for College calculator to help you get a ballpark number for determining affordability.
2. Baby’s arrival
Strollers and highchairs and clothes — oh my! Many of baby’s necessities, from big-ticket items like cribs, swings and car seats to everyday items like baby monitors, bottles, onesies and toys are often placed on a baby registry for friends and family to purchase and give at a shower. As a bonus, many registries give a free welcome bag of baby goodies plus a percentage off everything left in your registry.
PRO TIP: Babies outgrow clothes FAST. Save some cash and buy stylish, gently used items from consignment shops like Once Upon A Child in Davenport. Likewise, sell the items your child no longer uses or has outgrown and get paid on the spot. Try hosting a yard sale or posting items on a local swap group.
3. Wills and life insurance
Now that you have a financial dependent, consider investing in a last will and testament to better protect your new family. A do-it-yourself kit can cost as little as $150 and can easily be purchased online. Hiring an estate planning lawyer is the more expensive option, but these professionals are highly qualified to help you navigate the complexities and formalities of a valid will. Some charge by the hour while others charge a flat fee. Prepare to spend several hundred to several thousand dollars, depending on how sophisticated your estate plans are.
Life insurance is another important consideration for new or expecting parents. Having a policy in place makes sure your family is taken care of in the unfortunate event of your or your partner’s passing. Because life insurance rates are based primarily on life expectancy, it’s best to buy life insurance as early as possible to secure lower premiums.
Questions? Interested in learning more? Our Investment Services team is here to help. Contact IHMVCU Investment Services.
PRO TIP: A quick way to estimate how much life insurance you need is to multiply your annual salary by the number of years left until you plan to retire. To this number, add in your long-term financial obligations, like mortgage and cost of future education, then subtract any liquid assets. If you’re a stay-at-home parent, be sure to include the cost to replace the services you provide, like childcare.
Need a little help with your estimate? Check out our handy life insurance calculator.
4. Daycare costs, college funds and beyond
For most working parents, daycare is a necessity — and the annual cost can be staggering if you’re not prepared. Center-based care now averages more than $13,800 in Illinois and nearly $10,400 in Iowa, according to the Economic Policy Institute, and spots can be competitive. Choosing an in-home provider or hiring a nanny are additional options, but having a nearby grandparent watch your child (if you’re lucky enough) is probably the best for your pocketbook.
Preparing for your child to attend college is another expense to think about early on. With the rising costs of higher education, it can pay to start saving early in a dedicated education savings account or by starting a 529 plan, which allows tax-free growth and withdrawals.
Parenting costs don’t stop once the kids set off on their own. Many modern parents help their kids pay for part of their wedding, plus day-to-day expenses like cell phone plans, rent and car bills, to name a few.
Not surprisingly, having a child is a life-changing decision that comes with a lifetime of memories. More often than not, those memories will cost money — so start saving today because every little bit helps.