Having a kid is an enriching experience. Not only do you get the chance to create and raise someone who is truly unique, but you also get to experience the joys of raising a child. However, as we well know, the cost of having a baby adds up and is often unexpected.
If you’re considering having a child, you might have wondered about the financial cost that goes along with it.
A child will need to eat special foods and will need other supplies like nappies, a changing table, baby wipes, pacifiers, and so much more. In addition to these supplies, you’ll have to plan for childcare, education, toys, and extracurricular activities down the line (in addition to so much more!).
If you’re not sure where to start with financial planning for a kid, then we’re here to help:
How much does a kid cost?
Planning financially for a kid is extremely important so that you and your family can provide the best opportunities for your child. This type of planning will include the initial expenses of a baby, but also the long-term expenses like sending your child to college, providing for them as they grow up, and the financial cost of having multiple children.
Adding child expenses to your current daily expenses can add up. In Australia, one study estimated that a family might spend around $297,000 to raise a child from the time that they were born until they were 17.
These expenses do not account for changes to the Australian healthcare or tax system, expenses your family incurs before the baby is born, and expenses that occur after the child is 18.
These estimations suggest that a family spends roughly $340 a week per kid for the nuclear Australian family to live comfortably. And in budgeting for children, you’ll also have to account for fluctuations such as inflation, expenses incurred when one parent or guardian leaves the workforce (leading to a loss of dual-income, which could add up to a loss of $300,000), and unforeseen major expenses like accidents or injuries.
The cost of having a baby
Knowing that a baby is on the way is a considerably different mindset than knowing that you’ll have to save for your future child’s college education. For this reason, it’s important to break up the cost analysis into what you’ll need immediately after having a child and longer term needs.
According to Australian Institution of Family Planning, the first child expenses can range from $3,000 to $13,000 in the first year alone, which averages to $250 to $1,083 per month.
Of course, this cost will largely depend on how much your family can spend on caring for the child. But in general, you’ll want to over-save just in case.
What expenses should you plan for?
So what are you paying for exactly?
Childbirth at a hospital
Well, childbirth in an Australian hospital is free as it is covered under Medicare for Australian citizens and some visitors.
With Medicare, you won’t be able to choose your doctor or midwife, but this service is available so that Australian families know that their birth can be well-taken care of even if they have a limited budget or they don’t want to spend a lot on hospital bills.
Here are your options when considering childbirth:
- Medicare: Know that medicare doesn’t cover everything. While the overall hospital stay during the birth and visits with midwives and obstetricians during pregnancy is free, you may have to pay for other needs like ultrasounds, which range from $200 to $300. The cost of giving birth while covered under Medicare can still cost up to $1,500 depending on the number of ultrasounds, tests, or medicines needed. If tests need to be done outside of the hospital, then Medicare will rebate.
- Private Hospital: If you do want to go with your own private midwife or doctor, then you’ll also need to account for these additional expenses, which can range from $2,500 to $20,000 for private hospitals. While not all pregnancies might total $20,000, there are instances where complications during birth might incur additional expenses, so you need to be prepared for added hospital bills.
- Home Birth: Home births are also an option that Australian mothers can choose; home births provide pregnant mothers with the ability to give birth in the comfort of their own home with a midwife present. Prices for home birth range from $3,000 to $6,000 out of pocket.
While private options are available, nearly three-quarters of pregnant women in Australia choose a public hospital. So, the expenses that you need to budget for could potentially exclude medical expenses related to childbirth or preparing for childbirth.
For a new infant
Understanding expenses for infants is vastly different than long-term childcare and savings for children. Generally, you should expect to spend anywhere from $250 a month up to $1083 a month, or an average of $660 per month.
There are ways to get around superfluous spending, and a lot of these decisions will come down to how you choose to and how to have to raise your child. For example, prices will ostensibly rise if there are any follow-ups or tests that need to be done once your child is born.
Expect to have the following ready at the time of the birth:
- 5-10 cotton singlets
- 5-10 babygros, sleepsuits, and all-in-ones (a few in size newborn (0000) and a few in size 000)
- A soft hat or winter hat for a winter birth
- A soft blanket to wrap your baby in
- A car seat
For yourself, you’ll also need to have maternity pads and breast pads.
To care for the infant at home, you’ll want to consider the following expenses:
- The crib or bassinet, cradle or cot
- Changing table
- Nappies (disposable or reusable)
- Bottles, formula, and sterilising equipment
- Breastfeeding pump (optional)
The are budget options when it comes to these necessities. Babies go through a lot of nappies, around six nappies a day for two and a half years, totalling 8,000 nappies. But by opting for reusable nappies as opposed to disposable ones, for example, you could save around $6,000 by the time the child is toilet trained (around two and half years).
Additional expenses are really up to you. Nappy disposal systems aren’t always required, baby toiletries, baby towels, and a baby bath aren’t necessary but they can make your life more comfortable.
For long-term savings
Overall, consider budgeting an extra 18-22% of monthly child care budgets to account for the increase in food, housing and education. You may also need a bigger house, so you can expect that housing a child might add 18-22% more.
While having more kids is ultimately more money, the cost of a child goes down the more you have, especially since toys, clothing, and knowledge can be used from the previous kid(s). The first child will typically be $263 per week, but the second kid is only around $220 and the third $184.
You’ll most likely want to meet with a financial advisor if you’d like to start saving for your child’s Education Savings Fund early on.
How much should you save before having a baby?
Budgeting for a baby will depend on other family dynamics. For example, there are five family types: single people, a couple without children, a couple with one child, a couple with two children, and a female sole parent with one child.
In each of these scenarios, you’ll likely see a wide range of financial possibilities, which estimates that at the bare minimum, one adult is employed and receiving income (either at minimum wage, self-employed income, or unemployment).
Based on the wide range of possible living conditions, it can be extremely difficult to estimate how much any person should budget before having a baby. However, there are some items that your family should consider:
- Decide on private, public, home birth and budget at least $1,500 for the birth, even if going with a public hospital
- Plan for an average of $650 per month for the first year of birth
- A child averages $17,470 a year (for 17 years), which could end up being well over $1,455 a month as they get older
- Budget baby shopping is possible and does not mean that your child will be raised in a less healthy environment
- Don’t forget to plan for maternity clothes, maternity or paternity leave (which is paid out at the national minimum wage and could amount to a lesser income than what you’re used to), and doula classes (if done outside of the hospital)
- Any nanny support or housekeeper support needed before, during, or after the child’s birth ($200 to $500 per month)
For the year leading up to the birth, budget for around $500 to $2,000 a month on top of normal spending in order to prepare for your baby. This amount will depending on what you need during your pregnancy (i.e., clothing, medical support, home aids, and a deficit in income during paternity leave).
While this amount might seem excessive, remember that you should be purchasing some items in advance, and you might have to pay for ultrasound tests during this period. If you budget for this amount but don’t use it, then you can begin accumulating a savings that will carry over once you have your child.
After the birth, you can expect to spend $650 to $1,083 for your infant’s needs. If you rack up a hospital bill, that expense will come over you give birth. Following that, budgets look to be around $1,055 to $1,455 when your child gets older.
Work with a financial advisor so that you know and understand what your costs might be and how this relates to your income.
If you feel that you are financially ready to move forward with children but you’re not sure if you understand your costs of having a kid, you can easily work through this on your own, through a financial planner, or through a parenting planning service.
Australian Government: Australian Institute Family Studies. “Family Matters – Issue 100 – New estimates of the costs of children.” Retrieved September 24, 2020.
Australian Government: Fair Work Ombudsman. (2020) “Paid parental leave – Maternity and parental leave.” Retrieved September 24, 2020
Austrlian Unity. (2020). “The Education Savings Fund” Retrieved September 24, 2020
Babycenter (2020). “Buying for baby on a budget.” Retrieved September 24, 2020
Best Nappy Disposal System. (2020). Retrieved September 24, 2020
Canstar. (2017). “The hidden costs of having a baby.” Retrieved September 24, 2020
Emily Stewart. (2020). “The cost of childbirth and the hidden bills to prepare for.” ABCLife. Retrieved September 24, 2020
Huggies. “Maternity Wear | Cost of Pregnancy.” Retrieved September 24, 2020
Inositol Australia. (2020). “Help to Decide Whether To Have Kids or Not.” Retrieved September 24, 2020
Maurice Thach. (April 27, 2020). “The cost of raising children in Australia.” Finder. Retrieved September 24, 2020
Pregnancy, birth, and baby. (2020). Maternity care in Australia | Pregnancy Birth and Baby. Retrieved September 24, 2020