BOSTON (CBS) – Having a baby creates a family and makes us look at things differently. Babies, for the most part, are not a surprise so you do have months to do some planning.
The most recent numbers from the USDA on the cost of raising a child is $233,610. From birth to 18. This does not include a college education.
The most common goals for new parents:
- Baby essentials like a car seat & pampers
- One parent staying at home with the baby
- Larger emergency fund
- College savings for the newest member of the family
- Bigger house
- Comfortable retirement
Stay at home parent: You need to decide if you can live on one income and for how long. If you are pregnant or planning to have children try living on one income and save the other income. See if it’s doable.
According to Marketwatch, in 24 states, childcare costs more than college. According to the Boston Globe, average cost of childcare in Massachusetts is over $16,000 a year. One of the most expensive in the nation.
A bigger house: This goal may need to be put on the back burner if one of you is staying home with the baby.
College education for the baby: start saving when you are still changing diapers! Fidelity manages Massachusetts’ 529 college plan which is a good place to invest your college dollars and grandparents can also contribute to the account.
It’s not a good idea to put retirement planning on the back burner when you have kids. There are many new demands on your resources with a baby, but it is a mistake to stop contributing to your retirement plan.
So often new parents think in terms when the kids are older they will have more money to sock away for retirement. From my experience the bigger the kid the more expensive he becomes.
So continue to contribute to your retirement plan at work and if one parent does stay home with the baby consider using a Spousal IRA. The at-home parent can use the joint family income as the basis for their IRA and contribute up to $5,500 this year.
Be sure you both have adequate life insurance. Term life insurance is cheap for a young couple.