Quick, $1000, $5000, or $21,000? How much do you think baby’s first year will set you back?
The answer may surprise you! A recent study by Nerd Wallet found parenthood is pricey and many don’t realize it.
Ignorance is Bliss
According to Nerd Wallet, the cost of a baby’s first year can run between $21,000 and $52,000. However, slightly over half the people surveyed thought it would cost $5,000 or less.
As Sean MQuay explained on our KPIX Weekend ConsumerWatch segment, most people are pretty are off-base. In fact, almost 20% of respondents guessed that a baby would cost less than $1,000 in the first year.
Reality Check. Nerd Wallet looked at the costs of a baby’s first year at two different levels of spending. The lower level of spending totaled about $21,000 and the higher level added up to about $52,000. Only about 15% of people correctly thought the cost would be more than $15,000.
So now that you first-time moms-to-be are sufficiency stressed, and those without kids are feeling a little better about life, lets talk about what you can learn from the Nerd Wallet study.
Some Expenses Are Optional, Some Are Not.
Ask most second-time parents and they’ll tell you there are may items they won’t waste money on the second time around. From wipe warmers to fancy food processors, there are many gadgets in the baby super store that promise to make your life easier but just end up draining your bank account.
#NewsMom Note: Look for an upcoming post on “What I WON’T Buy for the Second Kid”
However, while some expenses are optional, many are not (i.e. extra housing, breast-feeding gear/formula, baby food, car seats, transportation, health insurance and additional out-of-pocket health care costs). However, Nerd Wallet found the largest expense, and most surprising for many, was the cost of child care.
Only about a third of people predicted that child care would be their greatest expense and instead seemed distracted by the cost of diapers and wipes. “Almost half felt that diapers and wipes would be the biggest costs. But in the whole scheme of expenses for a baby those items barely hit the radar,” McQuay explained. “I think this is why people underestimated the costs of a baby so much — because they’re focusing on the wrong expenses, like diapers.”
Nerd Wallet found the cost of child care ran between $8,059 and $26,870. By comparison, the cost of Miscellaneous diapers, wipes, clothes, and toys ran between $1941 and $6363.
Avoid Common Regrets
The study also found that parents regretted spending too much on clothes and toys in the first year, instead of saving more for the future.
“The biggest regrets from parents were about what they didn’t spend money on – really failing to look ahead,” McQuay said. He explained that the biggest regrets included not starting a college fund or saving more for college, and not contributing more to an emergency fund.
He says it demonstrates the importance of thinking beyond the first-year costs and planing for the future. Also among the biggest regrets for parents was not saving more for their own retirement.
Parents surveyed said they wished they hadn’t spent so much on clothes, toys, decorating the nursery and professional baby photos.
McQuay suggests having an open and honest discussion about finances with your partner, outlining your priorities. He notes that that babies aren’t going to remember the toys or clothes you buy them, determine your priorities, set a budget and stick to it.
He notes that becoming a parent is an important milestone and a good time to start looking at long-term financial planing, including purchasing life insurance and focusing on your own retirement goals.
But bottom line, no matter how much it costs, bringing that baby into the world is truly priceless.
Oh, and for those deep in the throws of the first few months of this parenthood thing, please believe me when I say, it gets easier! I promise.