Brace Yourself for the Cost of Baby's First Year
Non-parents are wonderfully naive human beings. From “I’ll still see my friends once a week when I have kids” to “I’ll get stuff done when they’re sleeping,” their optimistic expectations rarely match reality. And that’s fine! Except when it comes to finances. A new study found that most parents are underestimating the cost of baby’s first year by thousands, if not tens of thousands of dollars.
In February, NerdWallet surveyed a national sample of parents, non-parents, those currently pregnant or expecting to have a child in the next three years and those not currently expecting to have a child within three years, aiming to get a sense of what people think it costs to raise a new baby for that first year.
Before we dive in, want to make a guess?
Here’s what other people thought:
- 18 percent guessed $1,000 or less
- 36 percent guessed between $1,000 and $5,000
- 15 percent guessed between $5,000 and $10,000
- 20 percent guessed between $10,000 and $15,000
- 11 percent guessed $15,000 or more
The minority were correct here. Even after hypothesizing expenses for two very different types of families—those with a household income of $200,000 and those with a household income of $40,000 (considered low, but not low enough to receive government aid)—researchers found families are doling out up to $21,248 in the low-income segment alone.
Study authors assure parents that every family’s financial situation is different, and opting for used toys and clothes can make a difference in how much you spend. But a big part of the problem, they say, are the misconceptions surrounding a budget breakdown.
One false assumption? That diapers and wipes are going to be one of your biggest expenses. Don’t get us wrong; they add up. But NerdWallet found 48 percent of survey respondents and 50 percent of expectant parents, specifically, assumed this would eat up one of the largest chunks of their budget. NerdWallet estimates it will total around $743, less than almost all other categories analyzed.
On the flip side, families tend to underestimate other costs, like child care. While only 37 percent thought it would be a major expense, the average cost of a full-time daycare center is $8,059—the highest expense analyzed.
While the point of this research is to encourage parents-to-be to start saving as early as possible, if you haven’t, you’re certainly not alone. About 29 percent of current parents said they had no money saved before baby was born to help offset these first-year costs.
Most families’ backup plan? Counting on friends and family to pitch in. NerdWallet reports 61 percent of those who are expecting are also expecting some help.
Check out our trimester-by-trimester guide to securing your family’s financial future.