Budgeting for baby: how to save money
When Danny and Tracy Kofke were married in 2000 they knew that someday they wanted children. Tracy wanted to be a stay-at-home mom, and the couple also wanted a comfortable, yet modest, life.
From the time they got married, until their first daughter was born in 2004, the couple followed a strict financial plan to put them in a position to accommodate another member of the family. Danny and Tracy, both teachers, bought a smaller home than they could afford, they managed with one car, they paid off student loans, didn’t go out to eat very often, and built up a nest egg in anticipation of losing Tracy’s salary and handling life’s little emergencies.
Danny, who is the author of the book, A Simple Book of Financial Wisdom: Teach Yourself (and Your Kids) How to Live Wealthy with Little Money, says not giving into temptation when the housing market was white hot and the dot com bubble hadn’t yet burst was a lesson in delayed gratification. His friends would tease him to “get up off your wallet” but he and Tracy stuck to the plan. Four years after they were married, the couple had their first daughter and three years later they had their second.
The Kofke’s and April Lewis, an executive with a credit counseling service provided the following advice for getting your financial house in order before you have a baby.
Here are some of their suggestions:
- Cribs, strollers, baby seats and walkers are big-ticket items. Look online for discounted prices. These items can add up to $5,000 or more if you buy them new.
- There are numerous ways to meet your new baby's needs without breaking the bank. If you enrol your children in playgroups you’ll find that parents frequently pass along items, such as clothes, that their children can no longer use.
- Downgrade your lifestyle. Trade in a car that doesn’t get great gas mileage for one that is more economical. Shop at more affordable stores and buy more generic items.
- Create a budget based on a baby’s daily consumption. Babies go through 5-6 diapers per day, a cost of about $600 per year. For formula, parents use between five and thirty ounces per day, a cost of about $1,100 per year. Clothing can run about $500 annually.
- If mum is going back to work you’ll need to factor in the cost of daycare.
- An effective way of estimating the amount you could spend on medical costs is by asking your doctor for the cost of standard medical visits such as shots, checkups and prescriptions. Add all these costs and multiply the number of visits by your co-pay to get an estimated total.
If you're already living on a tight budget how do you ensure there's enough money for a baby? Here are some suggestions:
1. Breast feed
Breastfeeding not only is a great option for the health of your child, but it will save you money on the cost of formula. In the long run breastfeeding will save you money on medical bills, as babies who are breastfed are less likely to have colds, and allergies.
2. Reduce debt
You can’t embark on parenthood without first reducing debt. Design a payment plan to either completely get rid of or reduce your debt before your baby arrives.
3. Ask family members for help
Day care costs can add up. If day care costs exceed or equal your take home pay, it’s better for you to stay home with the baby. You can reduce day care costs by asking your family for help. Perhaps your parents and siblings can take turns watching your baby two or three times a week or in the weekends.
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