Babies can turn even frugal parents into spend-aholics who suddenly need top-of-the-line organic infant socks to match the bamboo sheets tucked around the cosleeper. But as many experienced moms and dads know, spending upwards of $11,000 a year—the average cost of a baby for a middle-income family, according to the Department of Agriculture—doesn't guarantee success and happiness. In fact, buying the latest in baby gear often unnecessarily stresses out already sleep-deprived parents. Here are five tips from experts on how to rein in costs, without sacrificing anything.
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Decide on a work (or no-work) plan. Erica Sandberg, author of Expecting Money: The Essential Financial Plan for New and Growing Families, says one of the first conversations parents-to-be should have after celebrating the positive pregnancy test should be about future work arrangements. For many people, this discussion is a short one, because they need two paychecks or they've always known one person would stop working once a baby came along. But she says the issue is far murkier for many families, especially when one person earns relatively little. "The more you earn, the more logical it is, from a financial perspective, to stay at the job. If you're only making $12 an hour, it doesn't make sense for both people to work, at least economically, because of the cost of child care," she says.
But she adds that there's one big caveat to that test: If you envision your life as involving work, no matter how low paying, or have plans to turn an unprofitable career into a more lucrative one later, then it can make sense to stick with it.
Don't mix debt with babies. "When you're pregnant, whittling down any debt you have should become a priority, because you don't want to have a baby and be behind. The gift you're giving to your whole family is financial stability," says Sandberg. That's another reason to scale back pregnancy spending in favor of paying off credit card debt, auto loans, and student loans. She also recommends creating a cash reserve equal to at least three months of living expenses.
Stacey Bradford, author of The Wall Street Journal's Financial Guidebook for New Parents, recommends cutting costs, even before the baby arrives: Eat out less, watch movies at home instead of in the theater, and resist the urge to buy a bigger car just because you have a baby on the way. "As long as you have a back seat with room for an infant seat, you're set," she says.
Take advantage of your body's free food supply. Baby formula costs around $100 a month, according to Sandberg's calculations, while breast milk is free—although many nursing moms purchase breast pumps and other nursing gear. The La Leche League provides free support to new moms who are learning to breast-feed.
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Set up a trust for your family. New parents need a will to specify where their assets should go in the event of their death; Bradford points out that in many states, assets are divided between the surviving spouse and children, which often comes as a surprise to parents. A will is also the place to specify whom you want to care for your children in case both you and your partner die.
In addition to a will, Bradford recommends that new parents consider taking out life insurance and setting up trusts for their children. A trust protects the assets that you want to leave them in case you die before they turn 18, she says. Bradford acknowledges, however, that the logistics can be challenging. As she anticipated the birth of her second child and tried to get her husband's life insurance and life insurance trust in order, she ran into paperwork problems. She wrote on her blog, "While the process itself should be relatively straightforward, don't be surprised if you encounter a few headaches along the way and if it takes much longer than you anticipate," adding that the inconvenience is worth the peace of mind.