Cost of Raising a Child: 3 Tips to Baby Proof Your Money

A baby inside of a crib

A baby inside of a crib | Source: iStock

Raising a kid is expensive — as in, there goes your vacation condo by the beach expensive. One government study says it costs almost a quarter-million dollars to raise a child to age 18. That doesn’t even include gifts from grandma or any help paying for college. The scary price tag to raise junior is based on several factors, but the good news is you can also save money along the bumpy journey of parenthood. Let’s take a look at three ways to baby proof your money.

1. Plan ahead

Planning ahead has the power to save you money in all aspects of life, including having a baby. According to the U.S. Department of Agriculture, the agency which says the average cost of raising a kid is $245,340, the largest expense item in your parenthood spending spree is housing, at $73,260. The figure incorporates the cost of having an additional bedroom, and assumes children in a two-child family do not share a room. Regardless of the methodology, you can help baby proof your home costs by planning years in advance, if possible.

Instead of being eager to buy a starter home with only two bedrooms that you’ll have to sell in a couple years once a stork visits, consider purchasing a three bedroom home that will suit your foreseeable needs for at least 10 years. When you have a kid, you’ll have a better chance of staying in your home and avoiding the costly process of moving to a bigger place. Mortgage bankers, real estate agents, and movers all take a toll on your money. The less you have to interact with these people the better, which is one of my favorite rules to live by.

My wife and I purchased our first home six years ago. It was a three bedroom with more space than we truly needed, and located in a great school district that we wouldn’t use anytime soon. However, we planned on having at least one child so we made the financial leap. We both hate moving with a passion and I figured a three bedroom house in a desirable area would be easier to sell than a two bedroom if the situation arose. Flash forward to this year, and we now have a 1-year-old boy. It’s incredible how much space his stuff occupies, but knowing we won’t have to move anytime soon due to space issues is a relief, especially since home prices have surged in recent years. It also helps that we both try to avoid clutter.

Interestingly, it looks like we’re not the only ones thinking long term. A recent Bank of America survey finds 75% of first-time buyers prefer to bypass a starter home and purchase a place that will meet their future needs. In fact, 69% would rather save more money in order to have a nicer first home in the future than a starter home now, while 35% want to retire in their first house. I don’t know if my wife and I will make it until retirement in our first home, but the thought has crossed my mind.

2. Scope out deals

No, I’m not talking about low financing on a new mama-tank that could fit five kids if you actually had that many. I’m talking about not overlooking small savings that add up over time. Target is one of the most convenient baby stores if you’re patient enough. When shopping for a car seat, we waited until the one we wanted went on sale, then we used Target’s Cartwheel app for a discount, a store coupon we received in the mail after signing up for their baby registry, and the Target credit card which offers a 5% discount on purchases. We even received a $25 gift card for buying the car seat. In total, we saved $120. When we found the perfect dresser at Nebraska Furniture Mart that could double as a baby changing table, we waited until they offered free in-home delivery, saving us about $80, and a hefty trip up our stairs.

You don’t always have to buy everything brand new. In fact, if you want to baby proof your money, you’ll need to explore the world of garage sales, thrift shops, and local Facebook groups. Unbeknownst to me until my wife clued me in, most major cities have swap and shop Facebook groups where you can easily find used clothes, toys, and other baby supplies in your area. It’s also not unusual for us to find baby clothes with the tags still attached at garage sales in the “rich” neighborhoods. When we have a desire to go shopping for new baby clothes, we use discounted gift cards for places like Gap and Children’s Place, purchased with Discover cash-back rewards.

People often say you should start buying diapers as soon as you find out you’re expecting a little one. “Every grocery trip, buy back a package. You’ll need it later.” This is because diapers are expensive and you need a lot of them. Spreading those first few diaper purchases out over nine months is less painful for the pocketbook, but nothing compares to cloth diapers. I realize the mere thought of reusing diapers in any capacity is disgusting, but many parents are trying out cloth diapers and finding out they’re not as bad as you think. At least research cloth diapers before you turn your nose at them.

3. Let other people help you

You need all the sensible help you can get when you have your first child. Before your little one even arrives, sign up for baby registries at popular stores like Target and Babies R Us. Not only will this help friends and family know what items you’d like, but there are also coupons and free gifts that come with simply signing up. If someone asks you what they can do to help out, consider having them cook meals you can freeze for later. It will be tempting to simply order take out due to baby exhaustion, but that will quickly add up.

Uncle Sam may help you more than you realize. Not only do you pick up another exemption to reduce your taxable income, and up to a possible $1,000 tax credit for children under 17 years old, you may qualify for the Child and Dependent Care Credit. If you paid someone to care for your child (age 12 and under), you could receive a credit up to 35% of your qualifying expenses, such as daycare centers, babysitters, and summer camps. The maximum amount of care expenses you can claim is $3,000 for one person, or $6,000 for two or more.

But wait, there’s more! If you’re thinking about setting money aside for your child’s education, Uncle Sam can help with that too. 529 plans are tax-advantaged investment plans to encourage saving for college. All 529 savings plans grow tax-free from federal and state income taxes, and withdrawals are not taxed as long as the funds are used on qualified expenses, including tuition, room and board, mandatory fees, books, and computers. All 50 states and the District of Columbia offer access to at least one type of a 529 plan. You don’t have to select the 529 plan offered by the state you reside in, but there might be additional tax benefits if you do, as many states offer a tax deduction on contributions. Remember to fund your own retirement before you child’s college fund.

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