Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.
This week's episode starts with a discussion of how to be a smart donor and support the causes closest to your heart. We recommend concentrating your donations on a few, well-researched nonprofits to make sure your money goes as far as possible. Look for ways to amplify your contribution, such as employer matches. And watch out for scammers who try to take advantage of natural disasters and other crises to swindle good-hearted people out of their money.
Then we pivot to this week’s question, from Skye. They say, "I'm a soon-to-be parent, and I'm freaking out about all the unknowns. I couldn't be more excited to have my baby, but I just don't know what to expect financially. How can I plan for the new expenses of having a baby?"
Congratulations! You’re about to start an amazing journey — and one that can get a bit expensive. A NerdWallet study found the cost of that first year can exceed $21,000, so you’re smart to want to plan for those costs.
One big expense is child care. The cost varies according to where you live and the type of care you choose, but can exceed $2,000 a month in more expensive areas. You can avoid paying for daycare or a nanny if one parent stays home, but you’ll need to factor in the lost income, as well as the lost benefits, 401(k) matches and chances for advancement. If you’re on the fence, consider that the need for child care starts to wane when the child starts school, so it’s not an expense you have to deal with forever.
Then there’s all the gear to consider. Pro tip: Most of it can be purchased gently used, and some of it you don’t need at all. Consult with more experienced parents about what’s helpful, what’s essential and what’s a waste of money.
A good budget can really help you navigate this new phase. We recommend the 50/30/20 approach that limits your “must haves” -- shelter, food, utilities, insurance and minimum loan payments — to 50% of your after-tax income, leaving 30% for wants and 20% for savings and extra debt payments. It’s easy for spending to get out of control when you’re a new parent, so set up a system that can help keep you on track.
Start planning and saving as soon as you know you're pregnant. You can use our baby cost calculator to get an idea of the first-year expenses.
Don't go overboard buying stuff. Check in with more experienced parents about what's a necessity and what isn't.
Look for gently used items. Some things should be purchased new, such as breast pumps and car seats. Otherwise, second-hand items or hand-me-downs are just fine and will help you save money (and the planet!).
More about new parent expenses on NerdWallet: