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Budgeting for a Baby: The Costs EVERY New Parent Should Expect

The BiggerPockets Money Podcast
41 min read
Budgeting for a Baby: The Costs EVERY New Parent Should Expect

The cost of raising a child is constantly changing. Every year, a new article comes out claiming that the cost of raising a child is hundreds of thousands of dollars. But is this figure accurate? Could kids actually cost far less than this, or does a few hundred thousand barely even scratch the service? What should new parents know before they bring home their first bundle of joy, and is financial independence even worth pursuing while raising a kid, let alone a few?

We brought in the Investor Mama, Jen Narciso, who is not only raising kids but also chasing financial independence and running her own podcast. Jen speaks to mothers all around the world who not only want the best for their children’s futures but their finances as well. And, as someone raising two young children, she knows how much kids truly cost between the car seats, formula, dance classes, doctors’ bills, and everything in between.

And, with Scott as a new dad, he’s got some serious questions to ask about how he can best raise his own daughter on a budget without sacrificing any quality of life in the process. Jen talks through the surprise expenses that most new parents overlook, how to save money on some of the most expensive items you need, the cost of child care and how to make it affordable, and whether to invest for your child’s future or your future retirement!

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Listen to the Podcast Here

Read the Transcript Here

Mindy:
Welcome to the Bigger Pockets Money podcast where we interview Jen Narciso from the Investor Mama Podcast and talk about preparing for a baby.

Jen:
There’s no right or wrong decision, it’s whatever you’re comfortable with because I know a lot of parents who need to work just for their mental health and choose to work even though that maybe their actual employment may not cover the cost of childcare, it’s just more for mental health than for nothing.
And I know other parents were like, oh my goodness, I just would love to stay home with my kids. And then I’ve been climbing the corporate ladder, I’ve been doing this for so long, but I feel weird not bringing in a check. Don’t feel weird for not bringing a check if you want to be home with your kids and then don’t feel bad if you do decide to work, because you’re not home with your kids. So there’s no wrong or right answer, just whatever’s good for your family.

Mindy:
Hello. Hello, my name is Mindy Jensen and with me as always is my brand new dad cohost Scott Trench.

Scott:
I don’t have any dad jokes about being a new dad.

Mindy:
You are unprepared with the dad jokes. Scott, who is always, always Mr. Dad Joke?

Scott:
Dad jokes about dad jokes. That’s the one set I don’t have.

Mindy:
Wow. Okay. Well with me as always is my dropping the ball co-host Scott Trench. Scott and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story because we truly believe financial freedom is attainable for everyone. No matter when or where you are starting.

Scott:
I’ll bounce back with that ball next time, Mindy. That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business or start your own family, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.

Mindy:
Scott, today we’re bringing in Jen Narciso from the Investor Mama podcast and we are talking about all the things that you need to start preparing for having a baby. You had a baby recently and did you buy out like all of Babies R Us? Does Babies R Us even exist anymore?

Scott:
Yeah, pretty much. We have a car seat, a stroller, a changing table, a crib, tons of supplies, a million diapers, all the goodies.

Mindy:
It’s super awesome fun. And hey, only for the next five years right?

Scott:
Only for the next 18, if we’re lucky.

Mindy:
Yes. We talk about paying for childcare for the next five years, but yes, this baby is around for the next 18 years and really they don’t go away after 18 years. They keep coming back. You keep going back to seeing your mom. Hi Mrs. Trench.

Scott:
Yeah, but you know what’s wonderful though is that, I thought that the infant stage would be like, kind of ugh. They’re just going to cry and whine the whole time. But I think it’s just delightful to hold my baby and see her get a little bit more developed each passing day, each passing week. It’s so cool and wonderful. So a hundred percent awesome. I’m just being a little sarcastic on the 18 years, 20 years thing so I couldn’t be more delighted and in love with our little girl.

Mindy:
Oh that’s so sweet. You’re going to make me cry, Scott. Wait until she turns three. All the parents of three year olds are laughing right now, and then eight and then 12. Those are the real slap you in the face ages that are super awesome. Jen Narciso from Investor Mama, welcome to the Bigger Pockets Money podcast.

Jen:
Mindy and Scott, thank you so much for having me. I am so excited to be on. I’m such a huge fan of you guys and I’m just, I can’t wait to dive in today.

Mindy:
I’m super excited to talk to you today. We’re talking about having babies. I’m not having a baby. This is not an announcement podcast.

Jen:
Neither am I.

Mindy:
On Jen’s podcast, she aims to educate, inspire and motivate moms and mothers to be on their wealth building journey. And I think one of the scariest articles ever written is the annual, how much does it cost to raise a child through age 18? Article that comes out. And it’s always some lunatic number, like $225,000.
My oldest is 15 and there is no way that I am even close to being on track to spend $225,000 on this child. Sorry Claire. But I think if you’re having kids, if you’re thinking about having kids, this article is super, super scary. So Jen, let’s talk about reality. How do we start planning to have a child?

Jen:
Yeah, well it doesn’t have to break the bank and if you’re thinking about having kids have kids, they’re amazing and awesome. So don’t let that dollar figure scare you. And when you have a child too, yes, it’s like you can plan and plan and plan but you also can’t plan for everything and don’t let the analytics side take over your brain because as soon as that baby comes, your emotional side’s going to gear in.
And so I think that’s also one of the things parents have to think about when they’re having kids. You can plan and plan but I do like to acknowledge though for a lot of moms or parents out there, sometimes it doesn’t always end the way they want it and to also acknowledge that. But there are definitely things you can do to start preparing for a baby and it doesn’t have to cost you hundreds of thousands of dollars for them before they even get to college. Just like anything with personal finance, personal finance is personal like Mindy always says and so is having a child and making decisions for your kid.

Mindy:
I love it. So how much should a parent anticipate spending on a child in their early years?

Jen:
So I ran numbers on the past two years that we’ve had. We have two kids, they’re toddlers now and we probably spent about $10,000 for the year combined. So what’s that, $5,000 per kid. And one’s two, one’s five. Now granted our childcare situation has changed a lot. So that has significantly helped reduce costs because I know childcare we’ll go into that and there’s definitely waste. But also my husband and I have chose things that are more expensive but we’re okay with those decisions because we’ve budgeted for it and it’s in line with our values and we’re okay spending a little bit more in certain areas on our kids.

Mindy:
I just want to underline that you have made a decision, you have specifically chosen to do something after weighing the pros and cons, after considering the other options. I am so judgmental about a lot of things that people do on this show, and more on the Finance Friday show than on the Monday shows, but I want to embrace this. If you have a reason for spending the money, that’s very different than just spending money for no reason whatsoever or spending money because you happen to think about, oh my neighbor has this so I should have it too. That’s not a good reason. Why are you spending the money on your children? I think that’s awesome that you are choosing on purpose to spend some money on certain things. And I’m sure you’re choosing to save money on other things. It’s just like everything else. It’s okay to spend money on things if they mean something to you. If it doesn’t mean something to you, then cut that.

Scott:
Can you explain how you came up with the $5,000 per child number?

Jen:
So I added up all the food that we spent throughout the year and I divided it by four, which is also kind of high. So that ended up being about a thousand dollars for the kids. Then for travel, I had a couple hundred dollars for travel. Again, I didn’t put in childcare. For our activities that was about 500 bucks. Granted one of our kids is doing a lot. We have a two year old so unfortunately he doesn’t get to do many things. Clothing, we are very blessed. My mother-in-law buys all the clothes so literally our budget was like a hundred bucks for the year on clothing. The thing that was actually surprisingly expensive was medical costs just with the kids. That was the biggest thing. They’re always getting sick and doctor’s visits and for us we have an HSA plan.
So before we reach the high deductible mark, our doctor bills are like $150 I think it was per visit per kid. So especially come winter, you’re looking at maybe five visits for two kids. So one kid may be two to three visits at least during the winter and that’s generous. And then entertainment, we are all about instead of presents we are really about experiences and having other people pay for those experiences for our kids. So we significantly saved on that.
We’re also all about secondhand things. So our kids toys, we probably spent maybe a hundred dollars on toys and books for our kids for the year because everything else comes from other people or from Facebook groups or whatever. So those were the big ticket items. We’ve also before our second, we house hacked for a while and all our friends thought we were nuts because we were house hacking with a newborn. But that significantly allowed us to save money too. That also helped us then with childcare costs.

Scott:
Awesome. So if you didn’t have some of those benefits coming in, friends, family, those type of things, what would you anticipate that that cost might change to?

Jen:
I also think it depends on where you live. We are in a very high cost of living area. It can very easily go to $10-20,000 a year. But again, it all depends on your choices. Do you need to buy the newest thing? Do you need to buy the top of the line things? Can you buy maybe not as nice a version, especially as the kids get older, I know this sounds terrible, but especially once we had a second kid. I feel like when your first kid comes, you’re all, oh my goodness, I have to get the best thing and make sure everything is a hundred percent safe and a hundred percent good and clean and everything. And then when you have the second one you’re like, okay yeah, okay this is from so and so, from here, I got this from that.
And you put it all together and you have this hodgepodge mess things. And you know what? The kids are still having fun with whatever it is. And as long as you’re providing a good fun environment for them, you don’t need to spend a lot of money on them. You don’t need to spend a lot on activities. You don’t need to spend a lot. The only thing that they… And honestly even food, you don’t have to, yes we did get a little bit of some of the organic stuff for our kids but they also eat chicken nuggets and cheap things. So it’s our choice. But some moms might be yelling at me and judging that they need all the top of the line and the best things for their kids.

Mindy:
It’s a choice but your kid does not need all organic, everything handmade by their own private chef. It comes down to what you value. And now I am getting judgey. Look at me. I will say that as long as your child is fed, the manner in which you feed them is your choice.

Jen:
And I will say too, so this year we’re totally breaking the bank and this was a decision we’re making, so our $5,000 has significantly jumped. But we are sending our daughter to camp because after Covid she was so isolated for so long, we really want her to, and a lot of her friends are going. Mindy, you are not going to like this number but it’s like $4,800 for four weeks. Which is absurd I know when the town camp’s like $200 for eight weeks.
We are spending the money. But again we have thought about it because to us it was just an important value and we budgeted for it. And so we’re cutting other areas and we really wanted her to have this social connection with friends who she hasn’t seen in a while. And it was important to us, especially after Covid and everything and all the social isolation, we just wanted to provide her with that. So that was a conscious decision. I’m not telling every parent to do that. And some of you again are probably like, oh my God $4,800 for four weeks. Are you nuts? Yes we are nuts but that’s okay.

Mindy:
Now can you afford the 4,800 or are you not going to make your mortgage payments because of it?

Jen:
No, we budgeted for the year. We planned for it, we researched it, we looked into it, we knew this was coming. It was a conscious decision. We’ve been very blessed because we’ve always been kind of frugal with money throughout our whole lives and always took the alternative paths so that we knew when we would have kids that this is what we want for them. We want to be able to provide the things we value for them and camp was one of them. Now is she going to go to camp every year? Probably not. Is there cheaper camps? Yes. Are we going to probably pivot? Yes, but at least for this year we wanted her to go to the one with her friends.

Scott:
Is Camp sleep away?

Jen:
No it’s not even sleep away, that amplifies it.

Scott:
Sleep away camps seems very worth it.

Jen:
With sleep away camp though there are a lot of scholarship opportunities and things too that you can look into.

Scott:
Can we hear about childcare and your thoughts on how to do that economically or what the options are? How much parents who know that they’re going to be needing childcare should plan a budget around that?

Jen:
Well first thing you have to think about is how many years is your kid going to need childcare for that’s paid for? So I love to get creative because for us, when we had our first, it was 1575 a month and that was one of the cheaper childcare centers in our area. That’s a mortgage for many parts of the country. But we had to do it because I was working full-time, my husband was full-time and we were really nervous thinking, oh my goodness if we have two kids, you’re talking three grand now that is, that’s more than I make. This is going to be just something we have to think about. So I don’t want to scare you, but there are things that I think parents can do. So first of all, talk about the different types of childcare. One is if you’re very blessed and you have family members or friends that might be able to do it.
I know since Covid people have been getting into pods so that maybe one parent kind of takes the lead on certain days and then another parent takes the lead on another day with a small group of kids. So that’s a way to kind of do communal daycare childcare without…
And I know that there’s rules and laws about what you’re allowed to do and not do with kids, but if it’s just you and maybe one or two friends, I don’t want to speak but I think it’s okay to do something like that format. So that’s a great way. I know some friends have been looking into that for their younger ones. Another type of thing is an au pair where you have someone who comes and lives with you. That can be a little bit cheaper than nannies. Nannies in our area are absurd. You thought 1500, 1600 was expensive. I don’t even want to tell you what the cost of a nanny was. I think it was closer to 2300 for one kid alone. Which again is like-

Scott:
Per month?

Jen:
Yes, per month. Which is so expensive.

Scott:
We’re seeing pricing at between $20 and $30 an hour.

Jen:
So let’s say somebody works eight, nine hours with commute maybe 10 hours with commute it adds up very quickly. And then if you have two kids you’re like wait. But I like hybrid models, I’m all about that because some people don’t have parents that can help and some people just have to work. So one of the things I love is, like I said, if you could do the hybrid model with friends but also if you could talk to your employer. Maybe you work an hour during the week extra so that you could have off one day and then your spouse can do that too if you’re co-parenting. This way that could be you only have to do daycare for two or three days a week instead of the full five days. Or maybe you could work from home so that you don’t have to put them in for the full day.
So when Covid happened and our daughter, sorry our other child was in daycare, we only had to do from nine to two and that saved us about $200 a month. It wasn’t a ton but it was still helpful. So any way you can kind of create hodgepodges so that you can be home with a kid or have someone else watching the kid to not pay for it is best. But childcare is just an expense you’re going to have to do. It’s going to be five years worth and then you can cut it out. So if you can just mentally prepare for that, for the five years and figure out what you want to do. And also people can stay home and give up their career for a little bit and go back. A lot of professions you can have the luxury to do that, a lot of professions you can’t. But either decision, whatever you decide.
I just love to highlight though, there’s no right or wrong decision, it’s whatever you’re comfortable with. Because I know a lot of parents who need to work just for their mental health and choose to work even though maybe their actual employment may not cover the cost of childcare, it’s just more for their mental health than for nothing. And I know other parents who are like, oh my goodness, I just would love to stay home with my kids. I’ve been climbing the corporate ladder, I’ve been doing this for so long but I feel weird not bringing in a check. Don’t feel weird for not bringing a check if you want to be home with your kids and then don’t feel bad if you do decide to work because you’re not home with your kids. So there’s no wrong or right answer, just whatever’s good for your family.

Scott:
I mean it seems clear that this is a cost of raising a child and it’s easily 20 grand for one child, double it or times and a half for two and times five years. So that’s a hundred grand right there. That makes that 225 per kid number that we were teasing earlier seem a lot more reasonable doesn’t it?

Jen:
Yeah. Well it can, if you do that full time. That’s why if you can stay home a little bit or if you can go with other parents, since Covid these pod groups have been forming a lot and one parent takes over. So if you are off one day a week, let’s say if I have two or three parents, everyone takes off one day a week and they’re in charge for that day with two or three other kids. Now maybe you only need two days worth of childcare or one day worth of childcare which is significantly cheaper.
The other thing is a lot of programs, if you really are struggling do offer discounts or benefits. So I always encourage people to find out. First of all you should shop around for any daycare you’re going to do anyway. But also shop around and ask the financial questions like if they offer grants, what are the income thresholds that people… Because even in our area surprisingly if you make even just like 150 to 180, you can still qualify for some money. It’s not a lot but at least it’s something. So let’s say you can knock off a day or two a week, then you can get a little bit of money back. We also have asked people for instead of holiday gifts to kind of contribute to a whatever fund and then we use that for childcare. That was another way to lower the cost. So it’s not easy but if you are planning for it, there’s definitely ways you can crack it.

Mindy:
So Scott, that’s really interesting that you brought that up. I stayed home with my kids because A, I wanted to and B, I wasn’t making any money. I did not have a career. I just had a job that I hated. So it was super easy for me to stay home with my kids after I had them. And I didn’t consider the cost of my career.
I didn’t consider the cost of childcare because I didn’t quote unquote have any cost of childcare because I was the childcare and my husband made enough money that it didn’t matter. I funded our 401K contributions and that was it. I wasn’t making anything at my last job before I stayed home with the kids. So that’s a really interesting point that 225,000 seems like such a stretch but if I would’ve had to pay childcare now it’s not nearly so much of a stretch. Because $100,000, sure that’s way easier to understand as raising your kid to 18. That’s super easy to do. That’s way too easy to do. That’s an interesting point.

Scott:
I mean the kid needs to be watched constantly until they are, unless they’re swaddled and secure in their thing, until they’re what 10. And even at 10 the can’t stay home alone but they can be alone in the other room maybe. So I think this is capitalism. If you’re not working, you’re not earning, that’s an opportunity cost. So that’s a direct cost, it’s a decision either I’m going to work or I’m going to watch the kid for 10 years.

Jen:
Well no because once they hit kindergarten-

Scott:
They go to school. But then there’s the kindergarten’s half day at least where we live.

Jen:
For us it’s a full day and then there’s very cheap… So our town offers very cheap programming for days of the week. So our daughter does dance one of the days that’s like $200 for the year, you could do sports that’s also $200, $300 for the year. So our town does have a lot of programming. So it’s another hack that you can do as your kids get older.
There’s the $500 a month dance class and then there’s probably a cheaper alternative. Look for the cheaper alternative. Look for also small businesses that have just started. A lot of them are looking for new clients. So maybe you go a town over or so, but there’s definitely ways that you can be smart too on activities for kids. And honestly our kids are fine if they don’t do activities. It’s not like we need to keep them busy. So if your kindergarten might be, I know some towns do only offer half day, but I also know some states offer free Pre-K too. So if you are living in one of those states, that can also help reduce the cost of childcare. And I know more states are starting to offer that so hopefully that will be something soon, but that’s not something we’re as a family are counting on.

Scott:
I think this has been a great conversation on this point. I think we should talk about some of the other expenses that come up. I just want to leave us with one thought here which is I don’t think there’s a really a good way around this once we consider opportunity cost. So if one spouse earns less than the cost of childcare on an hourly basis, then the decision may become very clear in that situation from that and there’s no brainer potentially unless there’s other long term upside or other considerations to be thought of on that career track.
But there’s not a lot of good answers here. If you don’t have that nice network nearby or friends that you can pool with or family or whatever that is. But it is just an expense and I think a lot of people just conclude, you know what, I’m going to wait until I’m in a really strong position in order to have kids. And I think that’s why people are having kids later and later. I mean this is a significant factor. I mean I’m 32 why we didn’t have kids potentially sooner.

Jen:
I think what some people can do though too is if you do choose to stay home, it doesn’t mean you have to stay home the full time. I pivoted also and I’m now a real estate agent so it gives me a lot of flexibility with hours. So I’m able to be home now a lot with the kids but still work and bring in income.
So that is definitely another option for parents out there that you can still work, you just may not be working what you thought you were going to be doing. But it doesn’t mean you still can’t bring in an income or still find fulfillment or still talk to other adults or, I hate using the word stuck but home 24/7 only raising your kids. There are ways that you can still do both, like have your cake and eat it too.

Scott:
Could you provide one more piece of context on this around how the ability to do a job like that might wax and wane with age. For example is that harder to do when children are toddlers than infants because the toddlers are consuming 100% of your attention all day as opposed to the infant that’s sleeping much of the day. How does that work?

Jen:
So I can tell you just from personal experience, being with a real estate agent when they were very little and now there hasn’t been so much of a change. It’s been more just mom guilt from my end because now I feel guilty for leaving. But I have to remind myself I am home so much more than if I was ever working full time.
So when they’re sleeping it’s so much easier to pick up and leave and go wherever you need to go. But even when they’re older, it’s still not terrible. You can still be a really great parent and still work a couple hours. Maybe you work a little bit at night when they’re sleeping or maybe you’re not there every day to pick them up from school but then you’re home for dinner. So it’s really a personal choice of what your comfort level is with leaving your kids.
And also then in the back end of who you can find to fill those hours in. Even if you’re an Uber Eats driver just because you need to get out of the house and do something. You’re not going to make a ton of money but you’re just getting in your car, throwing on some podcasts and just not being with a three year old the entire day because you need to keep sane.

Mindy:
That’s a good point. It can be the best job in the world and the worst job in the world all at the same time. You’re like, I already answered that question 312 times in the last hour. Stop asking. But it is very rewarding. I think this is a really great point about childcare being something to be conscious of. And I think when you are considering having a child, you need to really think who is going to be taking care of your child for the next five years.
If it’s you, what are you giving up to do this? If it is somebody else, how much is that going to cost? How are you going to pay for it? It is a really large part of the first five years of your child’s life and six, if you have a late baby. So I have a daughter who was born in November. She missed the cutoff by 30 days. So she had to wait an entire year extra to start kindergarten. She was almost six when she started kindergarten. And that is another consideration. Scott, you just had an October baby, she may or may not be able to get in at age five. She might be almost six when she’s going to school.

Jen:
And Scott, one thing to your point though about people waiting, yes it’s expensive but also sometimes waiting can have other just ramifications. You may not be able to conceive and all, there’s so many other thoughts into it. I don’t want people to be hung up on this either as a reason to not have kids or to really wait and wait and wait and wait.
I mean not everyone’s meant to have kids and if you choose not to, that’s your decision. But also don’t let this… Because I feel like also once you have kids you kind of also figure it out a little bit. It may not be the way you intended it but we’ve been doing this for thousands of years. People have had kids and they turned out okay one way or another. It may be really hard for five years, but I just don’t want that to deter people to wait till they’re in their forties for kids and then find out they may not be able to have kids or it’s a lot harder to have kids and all that kind of stuff too.

Scott:
Oh I’m not arguing with that at all. I’m just saying that’s happening for a lot of people because of what we’re discussing here. I mean these are big numbers we’re throwing out and a constant set of attention for a long period of time that a couple hundred years ago had a very different outcome for your life and now it’s wonderful but kids are expensive. They’re not a production unit in your household. They’re not guaranteeing your retirement.

Mindy:
They’re not a production unit in your household.

Scott:
I do it for love. I love my little baby girl and I want to have a wonderful, wonderful life. I’m not expecting her to contribute to the farm or whatever.

Mindy:
Oh good.

Jen:
One other thing though I forgot to mention is check with your employer too. My husband’s employer offers a $5,000 free money for childcare. So definitely also check with your employer. And I forgot to mention too, before you’re thinking of having a baby, maybe negotiate something with your boss too saying we’re thinking of having kids, maybe instead of getting a pay raise you ask for some time off or flexibility. Or you ask for, I want childcare credit or do you offer childcare? Some employers also offer childcare. So there’s also that too to factor in. And again, especially with we’re like at the end of the year now a lot of employers are doing interviews and things like that. And if you’re a good employee, do not be afraid to ask for what their childcare policy is, what benefits they have and all of that stuff too. And see if you can negotiate something.

Scott:
Well let’s talk about some things other than childcare here. So what are some of the other surprise expenses that come up with all this stuff?

Jen:
So for newborns you have the typical, you have your stroller, you have your crib and the mattress, changing tables, gliders, car seats, all of the fun things that you need usually kind of semi within the first six months to a year.
The other cost too, the big cost of childcare that no one talks about is having a baby. That could be significantly expensive. So another big tip is to see between you and your spouse who has the better insurance carrier, find out what they cover. And it might be also a good idea to switch to whoever has the better benefits. Because I know with my husband’s plan for me to deliver it would’ve been like $10,000 out of pocket and on my plan it was like $200 out of pocket and that also included all of the postnatal care and everything. And in the hospital I was able to take home a lot of the extra supplies and stuff. So that was also huge cost savings. So definitely insurance is a huge check and that can save you, because the cost of delivery could be crazy expensive as well.

Mindy:
That’s a great point. I think that my first daughter was a surprise C-section and that was, I want to say $47,000 that got whittled down to $800. And then the second child was a planned C-section that was different insurance whittled down to my out of pocket was $1,100. My pro tip for your giving birth expenses is to reach out to the hospital after you’ve figured out what your insurance is going to pay and what your portion is and ask them if they have a payment plan. So my daughter was born in the beginning of November. When all of the bills kind of shook out it was the middle of December and here’s this, you owe us $1,100. I’m like wow, it’s kind of tight, I could do it but I don’t really want to. I called up the hospital just to see if I could get on a two month payment plan.
Can I pay half now and half next month? And I call up and I said, I was looking for if there is any payment options and she said I can do 10 months or if you need more than that I have to send you over to another department. I’m like, nope, 10 months is great. Or no, maybe it was 11 because it was a hundred dollars a month. And I was like perfect. I could do a hundred dollars a month for 11 months. That’s way better than all of this right now.
It was 0% interest. It was really easy to do. So if you are stuck with a big bill, if you have a large out of pocket expense, talk to the hospital about options for payment plans or payment reductions or out of pocket cash payments. Maybe if you pay it all in cash you get a reduced price if you pay it all upfront.

Jen:
Yeah, that’s a great point. But that’s another I think big expense because all the other items really for me personally, anything besides the car seat, I was pretty much okay with hand me downs. The other thing was a crib mattress and the crib, but we bought a convertible crib so that it turns into a toddler bed and now a full bed. So even though we may have spent a little bit more up front, this is going to last for at least 10 years.
So we were okay with that expense too. So trying to think of things like that. So my framework for thinking okay, what do I need? The first thing I always ask, do I really need this item? There’s so many things you could buy a newborn but do you really need all of them? Do you need a saucer and a play mat and a bouncy and a this and a that or do you just need one or two places for them to sleep and then a bassinet? That’s kind of really what are the essentials or do you really need a changing station or can you just use your dresser in your room or get a pad and put it on your bed?
So I always ask, do you really need it? And then if I did need it, I would be like okay, does it need to be brand new or can it be used? And if it does needs to be new, is there a cheaper alternative? So for a car seat, can you get a different model? Can you get something that then converts from the infant carrier car seat to the turnaround to the booster chair seat, which is what we got. So again, ours are still lasting for at least eight years for this one item. Then if it’s used, can I borrow from someone? Do I have friends and family? That’s where I usually like to go first. But Facebook marketplace, there’s so many mom groups, buy nothing groups or even within our town we have so many groups of, hey I’m selling, I have these old clothes or I have this or that, I’m selling it for 10 bucks. Do you want it? Sure.
So many ways to get things on the cheap and especially if you have other parents who have kids. Most parents when you’re like, “Oh are you using those old clothes?” They’re like, take it, you want another thing, take it.
Because as the kids get older, they don’t need it anymore and they don’t want it. It just takes up room in their house. So borrowing from friends and family is a great way. The only thing I will say though, if you are buying strollers or maybe some of the other things, one, just check to make sure it wasn’t recalled. I know especially for strollers, anything made before 2015, there’s like new requirements and things. So things like that is make sure it’s up to code and also make sure it’s really not damaged, you don’t want to hurt the baby. But other than that it’s a fair game.
Clothes, you wash them. Even bassinets we borrowed, we hosed them down. Okay, our baby was in it for seven, eight months before we went to the crib. So you don’t need… And most parents do, that’s why if you know someone who’s a little bit ahead of you or even if again someone in town, again clean it and make sure it’s okay. But for the most part people aren’t using it that long anyway so it doesn’t have time to get ridiculously dirty or broken and all that.

Scott:
Jen how about formula for newborns for folks who need to formula feed?

Jen:
Yeah, so I would definitely call up the companies. Some of them offer discounts, especially if you’re going to be using it on a regular basis. So I know some of the big ones like Similac and I think Infamil offer. I would check with insurance too to see if any of it is covered.
Do not be afraid to coupon shop because these things can be expensive. Obviously if you can nurse that’s the ideal but not everyone can. So there’s no judgment there if you can’t. But that is then just going to be another expense that you factor in. But also usually around I think six months you start introducing more solid foods. So it doesn’t have to necessarily be forever either. It might just be a more expensive upfront cost in the beginning. But definitely call the companies and see what coupons they have, what discounts they offer. And like I said, also check with your insurance company because some offer benefits with that as well.

Mindy:
And also talk to your pediatrician. My pediatrician has a ton of formula samples and will give them to you if you request them. They did when I had infants, they don’t offer them anymore. My kids are 15 and 13. I have a car seat tip before we get too far away from this. Target offers 20% off for when you turn in a car seat they will give you 20% off a new car seat. So I think a car seat is something that you should buy brand new. You could get someone’s used car seat to turn into Target to take advantage of this 20% off deal. Car seats can be damaged in car accidents and you should not use them if you don’t know the whole history of the car seat and blah blah blah. But I wanted to get that out there before we got too far.

Jen:
Yeah, I think other companies do that too. I remember looking and seeing that. I don’t know if it was as much but that give a little bit of a discount or some money, gift cards or something if you return a car seat or other products as well. So that’s definitely something you can look into.
Also when you’re buying this stuff, look for when the discounts are. So if you know you’re planning on having a kid, let’s say you get pregnant, you know have 10 months. So there’s definitely better times at Target or even Amazon, like Amazon, their Prime Day, you may want to get some of the stuff that’s coming. Or during I think Memorial Day, Labor Day sales, they have different things for Buy Buy Baby and all that stuff. So definitely use that.
And the same thing I wanted to go back to the formula. I’m not necessarily recommending this but when you’re shopping around for pediatricians in the beginning, you know you can ask for different formula samples at different pediatricians and if you go visit maybe five you might be able to get a couple of samples from different places as well to kind of save on that end.

Scott:
Well what are some other good tips that we should be thinking about as new parents?

Jen:
One of the things I will also say is make sure you do have an emergency fund. I know we talk about this just in normal planning, but when it comes to having a kid, you should always have an emergency fund because there’s always expenses that come. I mean the biggest surprise for us was just medical bills and things that we weren’t expecting. Or maybe you really are planning on nursing but it doesn’t work out and then you have to spend money on formula and different things. But I would just say yeah, the cost, just have that fund, it’ll just also make you feel better so that you can sleep at night and not have to stress so much about all these little things. It’ll also give you a little bit of more freedom and flexibility to make better decisions that you want for your kids on things you value.
Another thing too is I didn’t have a baby shower or anything like that, but a lot of people wanted to know what to get us. So we would ask them to chip in on one item, one big item that we wanted, that helped put towards I think it was for the crib was a big one. And the other thing too is when you sign up for registries, sometimes they’ll give you discounts on one item. So be strategic too. And when you’re signing up for your registry, there might be different benefits and free samples that also that you can ask from different stores. So it’s another way to get some free things.

Mindy:
I think that is a good point about the emergency fund and like you said, you have approximately 10 months to build this up. So start throwing money into your emergency fund for kids because they’re going to break stuff, they’re going to need attention, they’re going to create emergencies. You are creating a little emergency tornado, growing it. Oh spoiler alert Scott. Okay Jen, let’s pivot a little bit and talk about parents and money mindset with parents. Do you think the average person can have children and still invest?

Jen:
Oh 100%. That’s actually one of the biggest questions I get from moms specifically, that they’re worried about do I invest for my kids college or should I be for my retirement? And my whole thing is get your financial house in order first before you start with your kids. Because kids can always figure out later on down the road how to pay for college. Whether through scholarships, who knows what they’re going to even go to college, what college is going to look like in other 18 years. You can always figure that out. But if you are going to have to move in with your kids because you have no money, that is going to be a huge burden. And I feel like so many of us already are experiencing that, we’re already the sandwich generation. Let’s not be that for our kids.
So definitely save even a little bit. Or if you really want to save for your kids college, I love Brandon Turner’s buy a house. But even if you can’t do that, just maybe put a little bit into a college fund. So maybe this is not financial advice, but instead of paying your Roth IRA for that year, put the $5-$6,000 into your kid’s college fund and at least that’s a start for your kid and let that ride for 18 years.
It’s not going to be a lot of money but through birthdays and other things, you can continue to add to it but at least you’re giving them something. But then definitely continue getting your house in order. So if you have a ton of debt, you also don’t want to teach that to your children. You are their example. And I feel like we have a responsibility as parents to also educate our kids on money. And so if we’re not doing it, how are we going to ever expect them to do it right?

Scott:
I completely agree with that. Obviously, not enough time has passed, but my tentative plan right now is to put all of the wealth in my name and earmark some of that for my daughter’s college education. So I’ll probably buy a property, put on a 15 year note, the Brandon Turner approach that Jen just referenced here. Let that note pay off, but that’ll be in my name and I may then cash out, refinance that. So it’s not going to be a property in her name for example at this point in time because I think that’s right. I think you build your private wealth and then use that to pay for the college education downstream is my philosophy that I’m applying.

Jen:
Yeah, I love that. And we still have 529 plans for our kids because when I was working in the city, I had a lot of tax benefits for doing that. So that’s something depending on your state and your work. So we get a lot of state benefits. So we contributed to that. Also, we have the UTMA accounts because I want my kids to have some money. They don’t have a lot, they have very little, but at least when they’re older they’ll be able to control it. Because I want them to manage their own money and I want them to learn how to use money and I’m okay if they blow it. I mean I don’t want them to obviously, but at least I want to teach them how to use it with me teaching them versus them trying to figure it out the hard way later on in life. So that was important to us. And Roth IRA for kids is also, that’s a whole other avenue, but that’s another great way to start getting your kids on the right foot.

Scott:
Let’s talk about that. Don’t you need income to contribute to a Roth.

Jen:
You do, but there are ways to hire your kids. I’m not a tax accountant, so this is not my area of expertise, but I have had people on my show talk about ways that you can hire your kids. So especially if you have a side hustle or something that as long as you can be realistic, you can’t fund it fully necessarily, especially if they’re really young, but if you are content creator and they’re helping you sort of like models, you can pay them minimum wage for a couple hours that you would pay something normally. And again, check with your CPA and all this. But there’s definitely ways that you can open up a Roth IRA for very young kids.

Scott:
So if my one month old daughter, for example, was the image on this podcast, I’d be able to compensate her for marketing services.

Jen:
Yeah, I mean it has to be a business that you have. I think you need a 1099 or some form of tax document to show you’re a credible business and then you can give some too. But again, I’m not a tax accountant so I don’t want to speak, but I definitely know there’s ways and I’ve been going down the deep dive. That’s my rabbit hole lately is figuring out how to hire my kids more and pay them more for their Roth IRAs.

Scott:
Well let me ask you another question then on that front, if you’re a financially independent household early in your kids’ life, you have a very good chance at accumulating a large net worth and you have a choice you can make early on. I think you can gift $18,000, $12,000, something in that ballpark to your child per year.

Jen:
Yeah, I think it’s 16.

Scott:
16 something, something in that range.

Jen:
I think so, yeah, don’t quote me on that but yeah.

Scott:
Okay. So over 10 years, that’s 160 grand, right? Over 20 years, that’s 320 grand. And if you invest that reasonably well in things like real estate, whatever that could be a million plus. And that can compound with whatever they earn in their teenage years. Your child could easily be a millionaire in their name without you passing your estate to them if you wanted to play that game.
And on top of that, you could find ways to do what you just described there with the Roth by giving them income that’s on top of that. So there’s a very clear path to putting your kids at millionaire, $2 million net worth status in their late teens, early twenties if you wanted to play that game or wanted to get aggressive. Should we do that?

Jen:
I am a believer of the whole thing. My husband and I have been on our FIRE journey and I love the journey. I don’t want to just do that. We can, yes. But I want them to learn and grow. We’re creating now even with our daughter, she knows that we have rental properties and she comes with me to screen our tenants and she knows that we buy houses for people and we make them look pretty. And she’s five and she knows that we buy things that make money. And all this money stuff, we are talking to her now. And so she’s the little one like “Yeah Mommy, I’m going to buy that house and that house and that house.” And people are like, what are you teaching your daughter? I’m like, yeah, don’t worry about it. She’s good. But I want her to learn.
I want her to do it herself. So I love the idea of having it. Me personally, I would not just hand it off. Now if you’re teaching your kids and when they get to that age and you feel comfortable and you’re working with them, maybe you build a business together, maybe you go into real estate together, that’s really a personal decision.
But for me at least where I’m at right now in life, I could change my mind later. I would not just hand off $2 million to my kids. Like that just to me seems like cheating for them and taking away from them the fun of it. It’s fun being on this. It’s fun to optimize, it’s fun to strategize. It’s fun to talk money. It’s fun to figure out am I going to go real estate? Am I going to start a business? Am I going to go index funds? Am I going to do all these different things? I wouldn’t want to take that away from them. And I’m not telling you not to go out and accumulate that wealth, so that you have the option to do it, but I don’t think I would just hand it over to them.

Scott:
This is a good problem that many in the FIRE community will have.

Jen:
It’s a great problem.

Mindy:
I agree with Jen. I wouldn’t just give it to them. I love the idea, Scott, of taking advantage of the tax free gift to give to your child in secret. It’s 16,000. I looked it up Jen, 16,000 for this year, 17,000 for next year. You could give her $16,000. She doesn’t understand that right now, Scott. So you don’t have to keep it secret from her.
But when she’s 15 years old she doesn’t need to know that she has $425,000 in a stock market account because maybe she’ll start to spend that or she’ll be like, look, I got into this account and I sold my Tesla stock because I wanted to buy a cute sweater at the mall. And you’re like, oh, I taught you nothing. Because not every lesson sticks. Scott. Let me tell you this, from 15 and a half years of moming, not every lesson sticks. And sometimes they do dumb things and yes, you should let them make mistakes, but you let them make $20 mistakes, not $425,000 mistakes.

Scott:
That’s my jet ski there.

Mindy:
Yeah, and you learned, but that’s a $5,000 mistake. So what is that phrase? Give a man a fish and he’ll eat for a day, teach a man to fish and he’ll eat for a lifetime. I think that you could balance it out a little bit by taking advantage of the time and giving her the money without letting her know that it’s there. And then maybe on her 18th birthday or her 21st birthday, you say, Hey, congratulations, you’re a millionaire and it’s in a trust. Or here’s all of the things that we’ve been teaching you about money now here’s this surprise. We’ve been gifting you money your whole life that we have been investing for you and here’s where it’s at.

Jen:
Plus I want my kids to work. I want them to learn that they don’t like it and I want them to have a business. So even if they are millionaires by 20, I still want them to be productive in society. I don’t want them to have the easy road. We already, with our five year old this year, she opened up an ice cream stand and she for an hour sat there while her brother went to the playground and she made money and she was very excited, but she was also kind of like, I’d rather go to the playground than sit at this ice cream stand.
But afterwards we debriefed and we talked about it and we let her buy something. Because I’m a believer too that you should spend money and you should teach your kids to spend some money so that they find it fun and because I want her to like business. I also don’t want her to hate business at five years old. But it was a really great experience for her to see. She said, “Mommy, oh my goodness, someone I don’t know, bought an ice pop. I don’t even know who they are. And I got money.” She’s like, “I’m rich, I have so much money.” It was like $2. But to her, she was so excited and I would’ve never want to take that away from her.

Scott:
Well Jen, this has been awesome. Thank you for coming in and sharing so much wisdom with us. So many tips and tricks and good advice here. Where can people find out more about you?

Jen:
Sure. You can check out the Investor Mama podcast. You can also find me on social media. I’m at Investor_Mama. Or you can go to investormama.com and definitely feel free to reach out. I’d love to connect, definitely any questions you have if you’re thinking about becoming a parent or you’re hesitant or not or anything else related to investing and being a parent. I love talking shop, so you can connect with me. Also, you just go to investormama.com/connect and you can find me everywhere.

Mindy:
Jen, thank you so much. This was so much fun and we’ll talk to you soon.

Jen:
Thank you guys. This has been a pleasure.

Mindy:
All right, Scott, that was Jen Narciso and that was a super fun show. I noticed that we spent a ton of time talking about childcare costs and I like what she had to say about get creative. Here’s the bottom line. There’s no easy button for childcare costs. It is going to cost you and it’s going to cost you a lot of money unless you have a family member who is going to watch your kids for free. And those are few and far between. And you should not count on that, you should have a backup plan for sure. It’s going to be expensive to take care of your child. And I thought you had a really great point, Scott the $100,000 for the first five years is very doable and that brings my $225,000 to age 18 well within reason.

Scott:
Yeah, well when we’re talking about how in the context of a child can cost you $225,000 or whatever the number is over the course of 18 years, if a hundred of that is childcare, then that becomes really easy to get to that, right?
I believe that the cost to raise a child per gen is somewhere in the five to 10 range if you want it to be, excluding childcare. Especially in the early years, how much can the food really cost with a lot of those things.
The activities, you can go as crazy as you want. I probably will spend more than that on our little girl over time, I would imagine. But the childcare piece is what’s really a full-time job that you’re going to have to pay for or do yourself at some point for five years. And I think that that’s the elephant in the room here that really needs to be planned around and there needs to be something that you’re doing there.

Mindy:
Yeah. If you are not pregnant and considering having a baby, how are you going to take care of this child? Who is going to be there? Because Scott, I think you said this after we stopped recording, somebody needs to be with this child all day long until they’re 5, 6, 7, 8, 9. When can you leave your child alone? Scott said you can’t leave them alone until they’re 10. I’m like, Ooh, don’t call DCFS on me, I think we left them alone when the littlest one was eight. I mean we went to a movie, it was a minute away. But this is a long term, I don’t want to say problem. Challenge? What is the right word here? Because it’s not a problem, but it is something that needs a solution.

Scott:
Constraint.

Mindy:
Constraint. This is a long term constraint that you need to figure out. And if you are pursuing financial independence, this is going to affect that. And I’m not saying don’t have a baby. My life would not be complete if I didn’t have a baby. I had two babies. But what are you going to do to cover these costs and cover this obligation? It is an obligation. You are bringing a child into this world. Somebody has to be there to watch this child 24/7 for the first 5, 6, 7, 8, 9, 10 years.

Scott:
And I think there’s a lot of good ways to work around it. Jen had a lot of good suggestions. The conclusion I reached a while back was might as well try to get as far along toward financial independence before I want to have kids as I possibly can. And for those who are listening who are in college or right out of it’s a really good idea to try to get as far along because there are going to be constraints that come on once the baby’s born.

Mindy:
I think we spent a lot of time talking about this and I think it’s an appropriate amount of time because I don’t think that this is something that’s really discussed. People talk about how much diapers cost and how much formula costs, and we talk about that too, but it’s really the childcare costs that you really need to consider.

Scott:
Babies aren’t units of production.

Mindy:
Babies aren’t units of production. Oh my goodness, Scott. You can email him at [email protected] and tell him all about your thoughts on babies aren’t units of production.

Scott:
They’re units of love.

Mindy:
There you go. Ah, okay, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench and I am Mindy Jensen saying bye-bye butterfly.

 

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In This Episode We Cover

  • The average annual cost of raising a child and why it’s not what you’d expect
  • Common child care costs and innovative ways to significantly lower your spending
  • Surprise expenses you should prepare for and why you always need an emergency fund
  • Money tips for new parents and how to sleep soundly even if you’re not financially free yet
  • Roth IRA investing for your child and how to fast-track them to financial freedom even earlier
  • Medical costs of having a child from delivery to regular doctors visits
  • And So Much More!

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.