One of the bigger costs that parents-to-be underestimate is child care. Although both parents may initially qualify for a leave of absence from their job, at least one will have to return eventually. Group child care is typically less expensive, says Judy Haselton, president of Harmony Financial Advisors. And if you prefer a stay-at-home caretaker, "There is a tax credit that parents should be aware of when you pay someone to care for your child," Haselton says. The best option might be to collaborate with parents who live near you. "Find a babysitting co-op in your neighborhood or set one up with other parents," Haselton says. "It's a way to barter services instead of pay for them." Try care.com and babysitterexchange.com to begin your search.
There are many who revel in the joys of going grocery shopping, yet research shows that doing so often leads to impulse buys of food you don't really need. Galia Tuchon, founder of downtoearthfinance.com and mother of two, suggests grocery shopping online instead. Try Fresh Direct (freshdirect.com), Peapod (peapod.com), even Amazon (amazon.com/grocery) (which offers free shipping for purchases that cost more than $25), Tuchon suggests: "The [items] might not be so much cheaper but you strongly resist the impulse buy and your total bill ends up being smaller."
Clothes, toys, baby room essentials -- all of these items can become fairly expensive. "A common mistake parents make is wanting to have the fanciest nursery or most expensive stroller, and they can waste a lot of money on items with shelf lives of six months," Stacey Bradford, author of The Wall Street Journal Financial Guidebook for New Parents, says. Your child will quickly grow out of them, leaving you to likely dispose of the purchases. A better idea is to find family and friends to pass them on to you. Better yet, make new friends online and receive something useful in return. Melissa Gould, of The Baby Planners (www.thebabyplanners.com), suggests creating profiles on websites like ThredUp (thredup.com) (their tagline: "Clothes don't grow. Kids do!") and SwapMamas (swapmamas.com), which specialize in connecting parents who like to save. Take advantage of the ability to connect with thousands of parents out there who might have just what you're looking for, or need just what you've got. "Remember, everyone's old is someone else's new, which makes for some great baby bargains," Gould says.
Many parents join classes of the "Mommy and Me" vein, and although the sessions can be informative and helpful, most moms also join because the classes are a social outlet for parents seeking people going through similar experiences, Bradford says. Instead, create playgroups with neighbors or people in your area. (Try playgroupsusa.com or playgroup.meetup.com.) When your child gets a little older, and wants to socialize with other kids who have a specific interest -- in sports, for instance, or music lessons -- don't enroll him or her in three or four different activities, which can result in costs of $300 to 400 per month, says Joan Koonce, a professor and financial planning specialist at the University of Georgia. "With most of the parents I know, the majority of their money goes to activities for their children," she says. Instead, limit them to one or two activities -- and search the web for free activities in your neighborhood.
Any financial planner will tell you that as soon as your baby is born, or even during the nine months prior to his or her birth, beginning to save for future education is a must. "I think most parents are surprised by how much money they need to set aside for their child's education," says Gabriel Trasatti, a principal at Trasatti Wealth Planning. Start by investing in a 529 savings plan; every state offers at least one of the many kinds available. Parents can choose the plan that best fits their lifestyle and finances. The plus? They are tax-advantaged. "It is one of the best gifts given to families by the government to help them save money for higher education," Haselton says. "If you start really early, a couple of thousand dollars a year will really grow over an 18-year period." Recruit family and friends. Open an account on UPromise, which allows friends and family to link their credit cards to your child's 529 plan. Every time they spend with one of Upromise's affiliates, you receive money. "It won't cost them a thing but easily adds a few hundred dollars to the 529 account annually," Tuchon says.
Health savings accounts were created in 2003, as part of the Medicare Modernization Act. They can be great sources of extra savings that can be used to pay for a child's medical expenses, Trasatti says. There is a limit, however, to how much money you can contribute, and only some people qualify. "You can open a health savings account only when you have a high deductible health insurance plan," Koonce says. Keep in mind that many health care plans provided by employers offers a well-baby program; it varies by employers but is designed to assist the mother before and right after pregnancy. These plans usually offer a generous return on investments, Haselton says, and many cover standard expenses associated with health care, including vaccinations.
The following options are not for everyone, but there is the potential to save a substantial amount if you decide to: Make your own baby food, breastfeed, and use cloth (non-disposable) diapers. Though individual purchases of food, formula, and diaper packages are relatively cheap, they eventually add up. Buy a blender and become inventive with vegetables and fruits of your preference. (Check out Blender Baby Food: Over 125 Recipes for Healthy Homemade Meals on Amazon.com). Breastfeeding is natural and eliminates spending on formula. And Consumer Reports finds that cloth diapers do not involve as much hassle or health problems as previously believed. A baby goes through about 100 diapers per week; using cloth ones is not only environmentally friendly, it also saves money that can be used for other baby essentials.
"One thing parents sometimes don't think about is what will happen to their children financially if something happened to them, and so they don't purchase life insurance," Koonce says. Term life insurance is the way to go, rather than whole life insurance, which is more of an investment policy and includes many fees, Bradford says. Most people purchase term life insurance for 30 years, which covers them until retirement. (Older parents may opt for 20-year coverage). "Chances are, by the time they're retired, they will have enough saved," Bradford says. Consider where the financial loss will be should something happen. If both parents are working, purchase for both. If one is a stay-at-home parent, consider whether child care will be affordable without them; if not, purchase for them as well. And don't give in to purchasing life insurance for your baby! He or she does not need it if you and/or your spouse is covered -- despite persuasive advertising by some companies. Use AccuQuote to determine the amount of your contribution.
"You really don't know how much money you waste until you begin to sit down and keep records of everything you spend on a daily basis," Koonce says. Once you begin to track, you can determine the areas in which you need to cut back. Use online budget tools to monitor both baby- and non-baby-related expenses, Trasatti says. Mint (mint.com), is the most popular tool at the moment, and arguably the most effective. It links to your accounts, and tracks how much you spend in given categories; you can also add your own categories and account for what you spend in each.
Copyright © 2011 Meredith Corporation.