How to Overhaul Your Budget When You’re Expecting a Child

Many people consider bringing up children to be one of their greatest achievements. However, you could have sticker shock when it comes to the cost of raising a child if you're not financially prepared. Get a head start on budgeting with children in mind and assess your current expenses to determine whether you need to shift your spending around. 

"It costs a middle-income family an average of $245,340 to raise a child."

Costs of Giving Birth and Raising Children
In 2013, The New York Times reported the U.S. was the No. 1 most expensive place in the world to give birth with natural births costing an average of nearly $30,000 and C-sections, $50,000. While a significant portion of these expenses are typically covered by insurance, parents could still have to deal with expenses that pile up immediately after the birth. 

Parents are likely to pay a huge chunk of their income on child-rearing. The U.S. Department of Agriculture estimated it costs a middle-income family an average of $245,340 to raise a child born in 2013 up to the age of 18. This accounts for the price of food, housing, childcare, education and other services. The cost of raising a child increased 1.8 percent from 2012 with parents in the urban Northeast region paying the most to take care of children out of all other U.S. regions. 

Income could also be a huge determinant in the total expenses involved in child-rearing. According to the USDA Center for Nutrition Policy and Promotion (CNPP), families earning the following household annual incomes will likely see these expenses when raising a child from birth to the age of 18:

  • Less than $61,530 annual income: $176,550 in costs
  • Between $61,530 and $106,540 annual income: $245,340 in costs
  • More than $106,540 annual income: $407,820 in costs

"In today's economy, it's important to be prepared with as much information as possible when planning for the future," Kevin Concannon, undersecretary for USDA Food, Nutrition and Consumer Services, said in a statement. 

Tips to Overhaul Your Budget
According to the report, the three biggest child-rearing expenses in order are food, housing and childcare/education. With these costs in mind, you could overhaul your budget to save money for your existing or future children with these tips:

"Contemplate how you can reduce certain spending areas in your budget to offset these costs."

1. Take time to adjust to a single income. Depending on your situation, some parents choose to have one parent stay at home while the other works full-time, resulting in a single- rather than dual-income household. By taking time to prepare for a single-income household, you could save yourself the trouble of adjusting your budget later on and then trying to catch up. Consider what your budget would look like with just one breadwinner and determine any expenses you might have to cut to save money.

2. Include costs of childcare. If your dual-income household chooses to keep your jobs, be sure to account for the costs of childcare in your area. Some expenses might be dependent on how old your child is, as childcare centers typically charge more to care for an infant than for older children. The cost could be determined by the type of childcare provider and demand in the area. You could also save money by enlisting family members or trusted friends to help look after your child and coordinate your schedules. 

3. Consider the cost of baby supplies and medical expenses. While new parents may not be full knowledgable with what it takes to raise a child, do some research about the average expense of everyday items like diapers. For example, the total cost of diapers from the time children are newborns to when they are finally toilet trained can cost between $1,500 to $2,000, according to WebMD. There is also the cost of medical care for children. With these added costs, contemplate how you can reduce certain spending areas in your budget to offset these costs. 

4. Lower spending for unnecessary items. To reduce expenses, cancel any services that you don't use much, such as deluxe cable and Internet packages. While you could pay $150 per month on hundreds of channels on cable and high-speed Internet, resulting in $1,800 in spending each year, you could cancel your cable service and put that money toward baby supplies and other expenses.