Money Rehab with Nicole Lapin - What to Financially Expect When You're Expecting

Episode Date: July 1, 2021

Babies are tiny and cute... and yet, there’s nothing tiny or cute about the way a mini-me will affect your spending plan. Nicole shares six things you NEED to do if you’re expecting.  For more info, go to: https://childcare.gov/consumer-education/financial-assistance-for-families Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

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money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. And should I have a 401k? You don't do it? No, I never do it. You think the whole world revolves around you and your money.

Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Today we are going to be talking about babies.

Babies are cute. Hot take, I know. They're adorable. They smell good. They're loving. All of these things are true. Here's one last superlative for you. They're expensive.

Babies are really fucking expensive. So I love that money rehabbers are reaching out with questions about financing a family because you should budget for a baby. Alyssa DM'd us with this question. Hi, Nicole. My name is Alyssa. I'm 28 and I'm currently pregnant with my first child. My question is simply, how do you budget for a baby and how do you plan for all those unexpected costs during the pregnancy and postpartum? I currently have to get ultrasounds way more often than I'm expected to because I'm considered high risk and that's a cost I didn't plan for. So now I'm not sure exactly where that money is going to come from. So how do you do it? How do you budget for all of that? First of all, Alyssa, I am so excited for you and your growing family. And I hope that

you're able to take a step back and be excited too. You should be enjoying the miracle of life, not worrying about finances, and we're going to get you there. There's a lot on this topic, so much so that someone might be writing a book about it. Wink wink. But for our purposes here today, I'm going to talk about what to financially expect when you are expecting. My advice is different if you're a few years away from having kids, if you're considering freezing your eggs like I did, or trying IVF. For example, Alyssa, if you came to me in your pre-pregnancy days, I would recommend that you bolstered your emergency fund so that you did have a little bit more cushion to help with the unforeseen costs like

these ultrasounds. I'll get to all that in future episodes, but today I'm going to be talking to the people in Alyssa's shoes. You're expecting, as in you have a due date or an adoption date someday marked on the calendar where you're going to have a new roomie in a freshly baby-proofed home. Babies are tiny. Babies are cute. Some estimates put the annual cost of having a child around $10,000, while others put it at $17,000. Of course, there are a bunch of factors that affect how much people spend on their kids, where they live, whether they're raising a kid with a partner, whether their baby has a medical condition, and how many kids they have, to name a few.

However, if you average out all of these factors, the USDA finds that parents are spending around $200,000 for the first 17 years of their kid's life. And that doesn't include the cost of actually giving birth or the potential college cost. The USDA breaks it down into the following spending categories. 29% for housing, 18% for food, 16% for child care and education, 15% for transportation, 9% for health care, 7% for the miscellaneous, and 6% for clothing. So let's paint a picture. Let's say you have a newborn. You're giving it all the love in your heart, of course,

but you're also giving your kiddo a lot of cash. Let's take a look at some of the costs in the first month of parenthood alone. You're spending between 50 and 80 bucks on disposable diapers. Cloth diapers are, of course, less expensive and better for the environment, but there's a lot of shit to put up with, literally, so the pros and the cons are kind of tough to weigh there. Formula costs around $150 a month, not counting the cost of bottles, sterilizers, travel containers, bottle warmers, all the bottle things. An infant car seat

costs between $80 and $400. Strollers can go from anywhere between $100 and $1,000. Baby monitors can range from $20 for lo-fi old school walkie-talkie looking models, while the video Big Brother style can clock in around $400. Bassinets are an average of $150. Baby clothes are around $80 a month because they grow into another size every five seconds. Families with full-time working parents can spend an average of $500 to $3,000 a month for daycare. HUSSA! I am not saying all this to scare you or to freak you out. I tell you all of this because I feel like I have the responsibility to speak up about

these costs because so few financial experts do. Hold on to your wallets, boys and girls. Money rehab will be right back. Now for some more money rehab. So now that we've talked about why you should budget for a baby, let's talk about the how. Here are six things you should do when you're expecting. Number one, if your health insurance doesn't rock, kick it to the curb. Some health insurance plans are more baby-friendly than others. Some plans cover immunizations, co-pays, and co-insurance fees, while others don't. Some plans even cover more granular costs. For example, the Affordable Care

Act requires some insurance plans to cover breastfeeding support, like a counselor, and breast pumps. So ask yourself, does your health insurance plan have you covered for where you are in your life? If not, it's time to switch. Typically, you can only change insurance plans during the open enrollment period unless you have a qualified life event that warrants a change. Having a baby does meet that criteria, so you don't have to wait until open enrollment to glow up your health insurance plan. Number two, claim a child tax benefit. You'll have increased costs when you're a parent, of course. That's just a fact. But you'll

also have a new opportunity to get some tax love. Don't forget to claim a child tax benefit when you file. Number three, put your wallet down. I'm sure your to-do list is a mile long and you want to make your home comfy cozy for your little one. But hold off on buying any new swag. Those pricey things I listed earlier, strollers, cribs, car seats, you can buy all of those things used or even rent them. And for the love of God, do not break the bank on toys. If you have friends who have blazed a baby trail for you, bring your kiddo over to their house and see what kind of toy your baby gravitates toward. Otherwise, you might stock up on bouncy balls only to discover that your baby likes stuffed animals. You don't know until you know. Number four, make friends. You'll benefit

a ton from finding a group of parents to connect with. To find your squad, you can try the app Meetup, or you could see if your doctor has any local organizations to recommend. These new pals may have hand-me-downs that you can borrow. Plus, you may even be able to go split-sies on babysitters. As we talked about before, child care is a huge cost. So if you can coordinate with another family, do it. Number five, set up a 529 plan. 529 plans are a special investment account designed to help guardians afford educational costs for their kids. The most popular kind of 529 plan is the savings plan. With the savings plan, you pay tax on what you contribute, like a Roth IRA, shout out to a recent retirement episode. But withdrawals are tax-free if they're used for qualified education expenses like tuition,

room and board, and so on. Plus, in some states, you might be eligible to deduct your contribution from your state's taxes. Tax-advantaged accounts are almost always the move, but especially when it comes to college, which is so expensive and a looming debt crisis, do this ASAP. Number six, call Uncle Sam. While the U.S. isn't very progressive relative to other countries when it comes to parental support, there is some out there. I'll link to the website in the show notes where you can go and get a little financial support. For today's tip, you can take straight to the bank if you you're expecting, it's time to revisit your spending plan. You're probably going to need to take some of that 15% in your

extras fund and move it on over to what you've been allocating for your end game. It doesn't mean that you should stop putting aside energy for self-care and the things that bring you joy, but see if you can swap out some of your pricier routines with free 99 adventures. Maybe instead of going to drinks with your friends where cocktails are $25 and never end at just one, you could go to the park. You could go to the beach. You could go somewhere where you could get some well-deserved R&R without breaking the bank. If those places aren't your jam and you still want some alcohol, which is also well-deserved, then check out our episode on how to get inexpensive wines that are still delicious and luxurious.

Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikader and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lanz, for her pre-production and development work. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.