How To Budget And Save Money With A Newborn
In Canada, the average cost of raising a child to the age of 18 is $243,660. To make that number a little easier to get your head around, that’s $1,070 a month per child. Of course, you need to factor in that most new mothers spend the first year of their child’s life – if not a lot longer – at home taking care of the baby, so there’s a loss of income, too. While there is a generally accepted idea that having a baby costs a fortune, the good news is that there are lots of ways to cut costs, helping you to save money.
How much does a baby cost?
The first thing you need to know is how much having a baby will cost you, because then, you know how much you should be saving during pregnancy or how much you need to aim to be earning once baby arrives. Unfortunately, there’s not a simple answer to this question. The Fraser Institute estimated in 2013 that the cost of raising a child in Canada was $3,000 to $4,500 a year, which would be around $3,400 to $5,150 today, due to inflation. This doesn’t sound too bad, but many people believed they left out a lot of expenses. Meanwhile, Money Sense estimated the cost would be $12,824 in 2011, or $14,350 today. There are so many variables to take into account, from where you live to what you think are necessities versus luxuries. For example, some people choose to use cloth diapers, costing up to $500 as a one-time expense. These can be used for years and for future children, so you can save a lot of money in the long-term. Other parents opt for disposables, which Investopedia states the average child will use over 2,700 of them in their first 12 months, costing around $550 at least. Splashing out on the initial cost of cloth can, therefore, save you a lot of money.
Practice living off one income
Most new parents will plan for mom to stay at home with baby, ideally for as long as possible. Of course, this means your household’s income will take a hit, so a common piece of advice is to practice living off just one income, usually the father’s. Many parents believe that it’s not how much you need to spend on a baby, it’s the loss of a second income that can cause financial difficulty. During pregnancy, use the mother’s income for one-off expenses for the baby, such as buying a crib, clothes, and bottles, save anything that’s left, and aim to pay all bills and expenses with the father’s income.
Money Crashers recommends sitting down and coming up with a budget to make living off of one income more achievable, looking at where you can cut back and see if you’re living within your means, otherwise, you may need to make some sacrifices to avoid getting into debt. Information gathered from Money Sense points out that for every year a parent is out of the workforce, they can expect a 3% drop in wage, so this is something that needs to be taken into account. They also say to consider how lifestyle changes will affect your finances, such as saving money on a daily commute, not eating lunch out as often, and spending more evenings at home. This will all lead to unintentional savings.
Throw a baby shower
Hopefully, someone else will throw you a baby shower, but if not, there’s nothing wrong with throwing your own or being involved in the planning of it. A baby shower can be a huge money saver or cost you a lot, depending on which route you take. Hiring a space can cost up to $200, but it isn’t necessary as you can throw a baby shower at your own home or a friends for free. Food will typically cost $5 to $10 per guest, which can quickly add up, so ask everyone to bring a dish with them instead. If you’re lucky, you may even have a friend or family member who is a great cake maker and decorator, saving you up to $4 per guest, based on upscale bakery prices.
Saving money on the baby shower is great, but the best part is that your friends and family will usually want to shower you with gifts for you and your baby. A good idea is to write a wish list of things you would like or ask guests for money instead of gifts so that you can get things as you need them. Even if you receive something that you know you won’t use, most stores will refund or exchange any unused gifts so that you can get something you will need instead. Doing things this way, you may find that you can tick a lot of items off your list, especially some of the more expensive ones.
Don’t let excitement control your budget
For most people, finding out you’re going to become a parent can be a very exciting time. Unfortunately, this excitement often leads to overspending, which many people later regret as they end up with hundreds of toys that have never been played with, and a bundle of outfits that have never been worn. Information from Sandra Martin, Editor-in-Chief at Money Sense, suggests that a lot of new parents splash out on things like an expensive stroller, but if you’re a parent who spends more time driving than walking, this can be a huge waste of money, so it’s important to assess your needs before buying. It’s also a good idea to ask other parents what they bought and never used, and what they would recommend to any new parent. Writing a list of what you think you’ll need can help you to avoid spending a lot of money on unnecessary items.
Babies don’t know the difference between designer and second-hand
As fun as it can be to buy tiny versions of designer clothes and shoes or splashing out on a luxurious crib, your baby won’t know the difference if you buy second-hand or cheaper versions instead. It’s important to remember that the cost of an item doesn’t relate to how much you love your baby, so try not to get caught up in it all. Friends and family may pass on items to you and shopping at a charity shop or online can save you a fortune. Second-hand items for babies are often like-new as they grow out of things so quickly, and you may even find yourself some new items at great prices too. Even buying goods from a neighbor’s garage sale can save you an average of $825 a year, according to a report from Kijiji.
Sticking to these tips and tricks can help you to save hundreds, if not thousands, of dollars, especially during pregnancy and throughout the first year of your child’s life. This can get you into good habits, helping you to save money as they grow up too, such as continuing to buy second-hand clothes and toys.