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    How Much Does It Really Cost to Have a Baby?

    By | Work + Money – Tue, May 25, 2010 8:55 PM EDT

    Everybody knows that having a child puts a dent in your family finances, but not everybody plans for it. What's worse, even those who do plan have lots of misperceptions about just how big an impact a little baby can have.

    Be aware of money mistakes new parents make the most - and what you can do to avoid them.

    Mistake #1: Where'd All the Money Go?

    Expectations: 76% of expectant parents say they feel financially prepared for having a baby - but 41% of new parents admit that, in hindsight, they were not as financially prepared as they thought.

    Reality: Why the huge discrepancy? It turns out there's a major financial roadblock that expectant parents often fail to account for: hospital bills. One in four new parents ended up spending more than $2,000 on out-of-pocket costs for services associated with a normal delivery - costs that they thought would be covered by insurance. On average, expectant parents are allotting just $776 to cover out-of-pocket delivery costs. Also See: How Many Kids Should You Have?

    Helpful Tip: Call your insurance company to find out exactly what will be covered for your delivery. And make sure you have the right idea about postdelivery costs too: Log on to the Internet to see what you could be paying for day care, a crib, a car seat, a stroller - even baby wipes, formula and diapers (at eight a day for newborns, they add up fast!). Then tally up what your costs will likely be, factoring in your family's lost income due to maternity and paternity leave. But don't forget - you'll have new savings, too, since you'll be going out a lot less once the baby arrives! "New parents don't spend on personal indulgences the way they used to," says Brette McWhorter Sember, author of Your Practical Pregnancy Planner. "These savings bring some balance to the enormous new costs."


    Mistake #2: Hey, Big Spender!

    Expectations: Nearly half of new parents say they spent more money than necessary on a car seat; 36% overspent on strollers; about 25% went overboard on baby photos, a crib and clothing.

    Reality: All new parents say they won't lavish their child with toys and clothes. But many respondents to our survey did just that. And you can't really blame them. "There's been a huge surge in luxury items for babies," says Tamara Draut, author of Strapped: Why America's 20- and 30-Somethings Can't Get Ahead. "No matter what a couple's financial status is, they feel pressure to buy these things - the bar has been raised for everybody." Also See: 3 Things You Never Knew About Parenting

    Helpful Tip: How can you fight the urge to splurge? Let someone else do it for you. If you've really got to have that $300 stroller, put it on your gift registry. Expectant parents in our survey were counting on their friends and family to buy 46 percent of their baby's first year of clothes, 40 percent of toys and 39 percent of baby-care items as gifts. Another alternative: Hit thrift stores or eBay to find what you want, albeit used. Miriam Nunberg, a 41-year-old mother of two from Brooklyn, scours yard sales for toys and tricycles. "People get rid of this stuff when their babies grow out of them and you can buy them for almost nothing," she says. Another tactic: Borrow. Ask your friends and family for hand-me-down clothes, used toys and gear.


    Mistake #3: Sweating the Small Stuff

    Expectations: 48% of expectant parents think that managing everyday expenses will be their biggest financial worry, but only a third of new parents feel the same way.

    Reality: Even though expectant parents tend to underestimate the overall financial impact of having a baby, they also overestimate the cost of daily expenses. Expectant parents figure on spending an average of $120 a month on diapers; new parents actually spend half that. What gives? New parents are savvier shoppers: Three-fourths of them shop for baby items at discount retailers, compared with only half of expectant parents. It makes sense: A Consumer Reports comparison recently found that some store-brand diapers work just as well as brand-name ones and cost a lot less - assuming you change six diapers a day, you'd save about $220 a year. Also See: Breastfeeding Facts: You Decide

    Helpful Tip: The best news about basic baby costs: "Daily baby expenses, such as for food, diapers and wipes, actually haven't gone up dramatically over the years," says Alan Fields, coauthor of the shopping guide Baby Bargains.


    Mistake #4: And Baby Makes Stress

    Expectations: 36% of expectant parents anticipate that tension in their relationship will increase after their baby's birth. Watch out: Nearly half of new parents found that to be the case.

    Reality: Of course, not getting any sleep and dealing with a crying baby don't help matters, but the added financial responsibilities also put a lot of added strain on relationships: Most new parents say baby expenses have increased their stress level, and the majority of expectant parents predict that they'll be in the same boat. In addition to the simple strain of all the new costs, there's uncertainty and disagreement as to what's really necessary - a sure formula for conflict. And once the baby arrives, couples tend to work together less on their finances. In our survey, the percentage of couples who split their family's financial management equally dropped from 44 percent before the baby was born to 32 percent after the baby's arrival. Who's taking on the added responsibility? Mom! Half of new mothers report that they handle the family money, up from 37 percent prior to the baby's birth. Also See: Clever Childcare Solutions Beyond Daycare

    Helpful Tip: "The combination of having a kid and all the financial pressures that involves, especially when one parent stays home for a while, naturally leads to relationship stress," says David Bach, author of Smart Couples Finish Rich. What can you do to cut down on the stress? Richard Ryan, a psychology professor at the University of Rochester, advises couples to keep one concept in mind: teamwork. Whether it's a big-impact issue like a budget or a small one like buying a toy, keep each other in the loop and discuss concerns openly. "The goal is to focus on agreement," says Ryan. That's not easy to do, but according to our survey, couples believe they can make it work: The majority of new and expectant parents say they are prepared to tackle any challenge. And that mutual optimism is money in the bank.

    How have you learned to budget as a parent? What to do you splurge on and where do you cut corners?

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