Children are a gift.They make us laugh, they make us cry and they make our lives worth living. On the flip side, children are also one of life’s greatest financial expenses. If you’re a new parent or will be soon, it may seem like you hear about a never ending list of things your child needs. Today I’m breaking down the biggest childhood expenses from age 0 to 5.
The Biggest Childhood Expenses You’re Likely to Face
Age 0 to 1: Diapers
Diapers are expensive. Not only is the price daunting ($20+ to $40+), the amount that a new parent goes through can be astounding. On average, a baby will go through over 2,000 diapers in his or her first year of life.
How to Save: To get a leg up on that expense, open a second checking or savings account just for baby expenses. Drop an allotted amount of cash in the account every month. You’ll soon have a steady cash flow for that expensive diaper fund.
Age 2 to 3: Day Care
I have known day cares to charge under $200 a week, to up to $1,000 a week depending on the region. For example, the $1,000 dollar a week
For example, the $1,000 per week day care in my area caters to the children of doctors, judges, lawyers and prominent corporations. However, no matter if you are a high-income earner or average Joe, day care can be brutal on a family’s budget.
The average cost of day care in the U.S. is $11,666 per year. However, the range can fluctuate depending on the area you are in between $3,582 to $18,773 a year.
How to Save: Sometimes you can offset the cost a little if you:
- Consider working at a day care to receive an employee discount.
- Find a center that offers a discount for siblings.
- Price the cost of living and decide if it’s financially healthier for you to work less and stay home with your child.
Age 4 to 5: Preschool and Health Care
Depending on where you live and the quality of the school, the price for preschool could be very high. The average cost of sending your child to preschool is between $4,460-$13,158 per year.
Health care is another big expense, especially in the early years. Not only do little ones get sick more often because their immune systems are not built up, but other health care expenses can arise too. Things like special therapies (speech, occupational, etc) or disabilities may not be covered under some insurance plans. Special surgeries or uncommon injuries may not be covered, either.
This means parents have to pay outrageous amounts of out of pocket expenses for things not covered under their plan.
How to Save: Find out what your insurance plan does and doesn’t cover. Consider opening a Health Savings Account and stockpiling it for unknown health-related expenses. The great thing about an HSA is that its contributions are tax deductible.
There are many things to think about when you have a new baby. Focus on the biggest childhood expenses and figure out how you are going to best navigate each one. This will help to ensure a financially sound first five years.