Personal finance

Three keys to avoiding new debt with a new baby

The arrival of a new baby can be one of the most joyous occasions in life. It also should be a time of careful planning for the little one’s arrival, everything from picking out baby clothes to furnishing their nursery and planning for longer-term needs — such as health care, child care, and education. According to a recent LendEDU study, a new baby costs families an average of over $13,000 in the first year, without including the cost of childbirth. But these costs can be managed, without going into debt, if you plan ahead.

1. Plan for child-care expenses

Child care is often one of the largest expenses associated with a new baby, both because parents take time off from work and see their incomes decrease, and because they hire nannies or enroll their kids in child-care centers. The average cost of child-care programs for infants and toddlers is over $1,200 per month, or nearly $15,000 per year, according to the Center for American Progress.

Do your research. Often, area churches or temples offers day-care programs at a fraction of the cost of non-religious ones. Make sure you maximize every perk offered by your employer, such as a paid leave and subsidized child-care. Consider nanny shares, where two or more parents split a nanny who watches their kids together, resulting in a lower cost per child.

Can you work from home, or can a family member pitch in to care for junior? The alternatives are numerous, and should all be explored. What matters is that you understand and budget now for the inevitable financial impact of caring for your new baby.

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2. Cut costs on temporary goods

When you’re expecting your first child, you want everything to be perfect and of the highest quality. And while your little one absolutely deserves the best, experienced parents will tell you that kids are not quite as picky as their parents. They can’t tell the difference between designer clothes and toys, and cheaper versions. For these temporary goods, which your children will rapidly outgrow (but which can consume a significant portion of your parenting budget), it makes sense to minimize costs to the extent possible, such as by shopping at discount stores, or buying resale items.

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Sites and apps such as VarageSale are a wonderful place to pick-up gently used kids’ items. Discounters such as TJ Maxx and Marshall’s also carry ample kids’ sections.(I picked up a $300 stroller for $60 at a Marshall’s a few years ago, and it’s still going strong today.)

Free hand-me-downs from friends, family, and community or religious organizations are another good option – and you’ll have the ability to pay the gift forward when your own little one outgrows them. The exception to the hand-me-down rule are items that pose safety or sanitary concerns. Car seats, for example, should ideally be purchased new to ensure no faulty or missing pieces that may compromise their safety. Pacifiers, teething toys, or any other item that may pose hygienic issues should also be purchased new.

3. Start a savings fund before the new arrival

If baby has yet to arrive, you have more of an opportunity to manage your upcoming expenses, by starting a savings fund designed specifically for your first-year needs. Ask friends and family to donate cash to your savings fund, rather than baby shower or birth gifts, so that you can better manage your expenses. Consider depositing any tax refunds, bonuses, or commissions into the baby fund, as well. No matter how much you collect, you may be surprised at how quickly it’ll be spent. And if any money is left over, you’ll have a prime opportunity to start an education or college fund, such as a 529 savings plan, with the excess funds.

Finally, entertaining and educating a new child is a wonderful way to enjoy community offerings. Libraries and parks often offer free story time or kids’ play activities. Most museums offer free days each month for families, along with activities for babies and young children. And community-based playgroups can allow you to meet other new parents, without breaking the bank on activity fees.

Parenthood is a tremendous gift. Savor it to the fullest by doing a little planning now, and focusing on your time with baby when he arrives

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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