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Think You Know How Much Your Baby Will Cost? Most Expecting Parents Don’t
Are you a pro at budgeting, or does your guesstimate of upcoming expenses tend to be way off the mark?
If you struggle with accurately projecting your future spending, you’re not alone.
Turns out the majority of parents-to-be are significantly underestimating the oh-so-many expenses that come up in a baby’s first year of life, according to a recent study by NerdWallet.
A little over half (54%) of people surveyed — who were either pregnant or planning to have a baby in the next three years — believed first-year costs would total $5,000 or less.
In reality, a family with a $40,000 household income is likely to end up spending $21,248 before their child’s first birthday, according to NerdWallet’s analysis.
A family with a $200,000 household income could end up spending about $51,985 during their baby’s first year.
That’s a vast discrepancy from the 18% surveyed who thought they’d be able to finance their baby’s first year with only $1,000 or less!
Missing the Mark
Perhaps the reason why so many expectant parents are in denial about the expense of babies is that they are misguided when it comes to the biggest budget items.
Full-time child care ranked as the highest expense — about $8,059 — though only 37% of expecting parents believed it was one of the biggest costs for year one.
Saving in advance of a child’s birth is another area where future parents are lacking, the study found.
Only 10% of parents surveyed saved $10,000 or more in preparation of their new addition. Almost a third (29%) did not save anything ahead of time.
Perhaps in hopes of offsetting the lack of savings, 61% of expecting parents thought their friends and family would help cover more than 20% of first-year costs.
A quarter of those surveyed had higher hopes, believing their loved ones would help them foot more than half of the bill.
If They Could Go Back In Time…
NerdWallet also posed questions to parents about what they wish they would have done differently when it came to how they handled money in their child’s first year of life.
Fifty-seven percent had financial regrets. About a third (33%) said they wished they saved more towards a college fund, while nearly a quarter (24%) said they regret not bulking up their emergency fund.
Beyond the Numbers
Now before the big figures and daunting statistics make you want to delay having a baby indefinitely, let me tell you — surviving parenthood is possible.
It helps if you have a company that offers good parental benefits or work in a position with a salary high enough to allow you to pocket savings before the delivery date.
Or you can bring in a little extra income doing these things right from the comfort of your home.
In addition, you can try to cut costs with these 31 ways to save on baby gear.
Bottom line: Think realistically, be smart with your cents and enjoy your time with your little one. I don’t need a study to tell you most parents underestimate how quickly the time passes.
Your Turn: Are you surprised at how expensive a baby can be for just one year?
Nicole Dow is a staff writer at The Penny Hoarder. One of her biggest fears is the cost of daycare.