Three keys to avoiding new debt with a new baby


The arrival of a new baby can be one of life’s most joyous occasions. It should also be a time of careful planning for the baby’s arrival, from choosing baby’s clothes to furnishing their nursery and planning for longer-term needs – such as healthcare, child care and education. According to a recent LendEDU study, a new baby costs families an average of more than $13,000 in the first year, not including the cost of delivery. But these costs can be managed, without going into debt, if you plan ahead.

1. Plan for childcare costs

Childcare is often one of the biggest expenses associated with a new baby, both because parents take time off work and see their income dwindle, and because they hire nannies or enroll their children in day care centres. The average cost of child care programs for infants and toddlers is over $1,200 per month, or nearly $15,000 per year, according to the Center for American Progress.

Do your research. Often, area churches or temples offer child care programs at a fraction of the cost of non-religious programs. Be sure to maximize any benefits offered by your employer, such as paid time off and subsidized childcare. Consider nanny shares, where two or more parents share a nanny who cares for their children together, reducing the cost per child.

Can you work from home or can a family member step in to look after junior? The alternatives are many and should all be explored. What matters is that you now understand and budget for the inevitable financial impact of caring for your new baby.

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2. Reduce the cost of temporary goods

When you are expecting your first child, you want everything to be perfect and of the highest quality. And while your little one absolutely deserves the best, experienced parents will tell you that kids aren’t as picky as their parents. They can’t tell the difference between designer clothes and toys and cheaper versions. For those temporary goods, which your kids will quickly outgrow (but which can consume a significant portion of your parenting budget), it makes sense to minimize costs where possible, such as shopping at discount stores or buying resale items.

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Sites and apps like VarageSale are a wonderful place to pick up gently used children’s items. Discounters like TJ Maxx and Marshall’s also have lots of kids’ sections (I bought a $300 stroller for $60 at Marshall a few years ago, and it’s still going strong today.)

Free donations from friends, family, and community or religious organizations are another good option – and you’ll have the option to pay for the gift when your own little one has outgrown them. The exception to the ready-to-wear rule is for items that pose safety or hygiene concerns. Car seats, for example, should ideally be purchased new to ensure there are no faulty or missing parts that could compromise their safety. Pacifiers, teethers or any other items that may pose hygiene issues should also be purchased new.

3. Start a savings fund before the newcomer

If baby hasn’t arrived yet, you have a better chance of managing your upcoming expenses by starting a savings fund designed specifically for your first-year needs. Ask friends and family to donate cash to your savings fund, rather than baby shower or baby shower gifts, so you can better manage your spending. Also consider depositing any tax refunds, bonuses or commissions into the baby fund. No matter how much you collect, you might be surprised how quickly it will be spent. And if there’s money left over, you’ll have a great opportunity to create an education or college fund, such as a 529 savings plan, with the excess funds.

Finally, entertaining and educating a new child is a wonderful way to take advantage of community offerings. Libraries and parks often offer free story time or play activities for children. Most museums offer free family days every month, as well as activities for babies and toddlers. And community playgroups can allow you to meet other new parents, without breaking the bank on activity costs.

Parenthood is a wonderful gift. Enjoy it to the fullest by doing a little planning now and focusing on your time with baby when he arrives.

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