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This chapter is from the book

Planning a Family? How to Prepare Financially

Q: My wife and I are planning to have a child in the next couple of years, and I realize that I have no idea how to go about preparing for that financially. How much cash should new parents try to have available? What else should we be considering?

A: Congratulations in advance on your entry into the great adventure of parenthood. The most important thing to know is that you can’t predict what’s ahead, financially or otherwise.

The U.S. Agriculture Department estimates that it will cost middle-income parents nearly $300,000 to raise a child to age 18. But your costs could be a lot less if you’re particularly frugal or a lot more—particularly if you have a high income, plan to pay for private school, or have a child with special needs.

You can get some idea of what to expect by using the Agriculture Department’s new calculator, at www.cnpp.usda.gov/calculatorintro.htm.

Your annual food, clothing, and health care bills typically rise $3,000 or more with each child. You also may opt for a bigger home or car, which can add to the bill. Child care and education are other considerable expenses.

Then there are the setup costs. Denise and Alan Fields, the authors of Baby Bargains (Windsor Peak Press, 2011), one of my favorite books about preparing for a child, say you easily can spend more than $6,000 just on equipment such as strollers, car seats, maternity clothes, and nursery care. If you’re smart, however, you’ll try to spend a lot less by buying or borrowing used furniture and selecting well-reviewed, midrange brands of strollers and car seats rather than status brands.

You’d be smart to start trimming other expenses now and saving the difference so that you have a fund to pay these startup costs and the added expenses of a child don’t push you into debt.

If one of you is planning to stay home with the baby for an extended time, consider starting to live on one income now and banking the other.

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