Ringing up baby: What infants really cost
You get a lot of financial advice when you're about to have a baby. Sometimes it pays to listen.
(Money Magazine) -- When you're expecting a baby, as my wife and I are, you get a lot of advice. Grandparents-to-be, co-workers, affectionately nosy old ladies on the bus -everyone has ideas.
Some are helpful (tips about the best swaddling blankets, say). Some are questionable (read to the baby before it's born?).
As the bromides add up, it's clear we have a lot to learn. That's okay when we're experimenting with blankets and mobiles, but the financial advice has me a tad worried.
I'm not talking about the basics. I already know I have to buy more life insurance, write a will and start a college fund as soon as the little bugger has a Social Security number.
What scares me is the stuff I don't know I don't know. My wife (our CFO) is due to give birth this month, and while we've thought a lot about the color of the walls in the nursery - we're going with Prescott Green - we didn't realize we'd need to raid our savings to furnish it, as one friend warned us.
Nor did we know what to say during a recent dinner-party debate about whether it's gauche to register for baby supplies. And we were blindsided when an acquaintance suggested we slash our 401(k) contributions to make sure we have cash for diapers and burp cloths.
These peripheral bits of advice have us wondering if we really do have our financial ducks in a row. Plenty of expectant parents apparently share our worries.
A 2005 survey found that 87 percent of people with a baby on the way fear being stressed out by the expenses. Worse, 81 percent of new parents confirm those fears.
To better prepare us, I sifted through some of the tips we've gotten to determine which are helpful and which are useless. My conclusion: While a few financial changes are inevitable when you have another mouth to feed, a newborn doesn't have to turn your finances upside down. Only your sleep schedule.
Conventional wisdom: "Be prepared to spend a small fortune on baby stuff"
The verdict: True - to a point.
The typical new mom and dad spend $6,200 outfitting their baby in the first year, from cribs and car seats to clothing and formula.
Sure, infants need a lot of equipment. But the $7.1 billion baby products industry is also very good at selling unnecessary, overpriced paraphernalia to inexperienced parents who don't know any better, warns Alan Fields, co-author of "Baby Bargains," a consumer guide.
The key to not overspending, says Fields, is to focus on your primary job: creating a safe place for your baby to sleep, cry and soil diapers.
Stuffed animals and mobiles are fine, but only after you've covered essentials like a sturdy crib and practical onesies. And steel yourself against the hard sell.
"When you buy a crib, the store might try to sell you a bedding set with a quilt, pillows and frilly accessories," says Fields. "But a sheet and cotton blanket are all a baby really needs." In fact, quilts and pillows are a health hazard, increasing the risk of suffocation.
Conventional wisdom: "Registering is tacky"
The verdict: False
People are going to buy you gifts anyway, so give them a little guidance on the items you'd appreciate most.
When people ask you what you want for the baby, by all means tell them -honestly. Otherwise, Fields says, you'll find your baby with a closet full of unworn sailor suits.
Conventional wisdom: "You'll have to slash your 401(k)"
The verdict: False: The impulse to cut retirement contributions to free up cash before you have a baby is understandable: This tiny new person's life depends on you, so socking away greens fees for the year 2037 seems a little selfish.
Getting in the habit of reducing contributions every time a new financial undertaking (like having a baby) comes along makes it difficult to restore your allocation to pre-baby levels, says Scott Kahan, financial planner and father of two.
Conventional wisdom: "Disposable diapers are the best deal"
The verdict: False
If there's a financial winner, it's cloth, although it might be a wash. (Heh.)
Consider: If you change your baby eight to 10 times a day, that would add up to 7,000 to 9,000 diaper changes from birth to age 2ｽ. At an average price of 25｢ per disposable diaper, you'd spend $1,750 to $2,250.
A diaper service, meanwhile, might charge $15 a week for cloth diaper delivery and laundering. The tab to age 2ｽ: $1,950.
Washing cloth yourself? Cheaper still, but gross.