You’ve probably heard that it’s expensive to have kids. But do you know the true cost? Some estimates show that it costs the average family over $230,000 to raise a child to adulthood. That doesn’t even include the costs of sending them to college. Chances are, you don’t have that kind of money sitting around. While that number is certainly high, there are some things you can do to start budgeting for kids before you have them.
Create a Budget
Budgeting is a good idea for anyone trying to save a bit of money. This is particularly true for individuals who are planning to be parents soon. There are two ways budgeting is going to be beneficial for soon-to-be parents. First, it’s going to save you some money before your baby arrives. But you’re also going to learn how to live a more frugal lifestyle, which will be essential to making things work once you have a kid.
Here are the steps you need to take in order to create a budget:
- Get all your financial statements in one place. This includes anything that shows an account balance, or any kind of income or expense. Make sure you get everything, or else you won’t be able to create an accurate budget.
- Total up your monthly income and costs. This will show you exactly where your money’s going and will give you an idea of how you can save more.
- Distinguish between your constant and changing expenses. Constants are going to be things like rent or a mortgage payment. Changing expenses are spending money going out to eat—or even things like utilities if you use significantly more energy during certain months.
- Find ways to cut out expenses to save more money. You’ll want to look at both your constant and changing expenses to find ways to save more. Try to limit the amount you dine out or consider cutting back on some of your subscriptions and memberships. You can also save by reevaluating your constant expenses. Consider downsizing to a smaller living space or getting a less expensive vehicle.
No matter how much you decide to cut out of your monthly expenses, it’s important that you come up with a plan. Determine how much you’re going to need when the baby arrives and figure out the best ways to reach that goal.
Try to Eliminate Your Debts
You’re going to be hit with a lot of new expenses when you have a child. You can prepare for a lot of these, but many will also be entirely out of your control. Eliminating or lowering your current debts is one of the best ways to prepare for this increase in new costs. It’s a good idea to increase your debt payments when you figure out your budget.
If you have debt in the thousands or tens of thousands and are worried about how this will affect your future family, now is the time to start chipping away at it. Some consumers with extreme debt have found success through settlement. Debt relief programs like the one offered by Freedom Financial Network require enrollees to make monthly deposits into a designated account for months or years until they’ve saved enough. Then professional negotiators contact creditors, aiming to settle existing debts for less. Since these programs require some time to complete, it’s smart to start now so you’re squared away when your bundle of joy arrives.
Use Saving and Investing Apps
If you have a baby on the way, you need all the help you can get to put more money into your savings. A lot of people are uncomfortable with the idea of investing because it comes with a risk that you might lose money. However, when done correctly, it’s one of the most effective ways to save for the long term. There are now a ton of apps out there that help people invest their money for a very low cost. Stash is one of the most popular, as it comes with an extremely low cost—only one dollar per month if your account is under $5,000, and unlimited free trades. Wealthfront is another good app for people who want to start a college savings plan early. It offers a low-cost solution to helping people prepare for that big expense later in life.
Sell Your Unused Items
It’s a good idea to sell things you’re not using at a garage sale or online. This will instantly give you some extra cash that can either go to savings, paying down debts, or purchasing necessary items you’ll need for your baby. You’ll also be doing yourself a favor by making some extra room in your home.
There’s a lot you need to think about when preparing for a child. While having kids is an expensive endeavor, starting to save now can help you pay for all those added expenses down the line.