Smart Money Podcast: Make Your Donations Go Further; Plan for New Baby Expenses

Sean Pyles
Liz Weston, CFP®
By Liz Weston, CFP® and  Sean Pyles 
Edited by Kathy Hinson

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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?"

Know where every dollar goes
Find ways to spend more on the things you love, and less on the things you don’t.

Our take

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.

Our tips

  • 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:

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, return to the podcast homepage.

Liz Weston: Welcome to the NerdWallet SmartMoney podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm your host, Liz Weston.

Sean Pyles: And I'm your other host, Sean Pyles. As always, be sure to send us your money questions. Call or text us on the Nerd hotline at 901-730-6373, that's 901-7308-NERD, or email us at [email protected].

Liz: And while you're at it, please rate, review and subscribe wherever you're getting this podcast.

Sean: This episode, we're talking about something that I admittedly know very little about, which is expenses to plan for as a new parent. But fortunately, Liz and I are talking with Kim Palmer, a Nerd who has tons of first-hand experience with her own kids. And Liz has her own experience too, which is great.

Liz: First, though, we'll dive into our “This Week in Your Money” segment. This time around, we're going to talk about how we think about donating to social causes and nonprofit organizations that we care about, and how to vet platforms that you're thinking of donating to.

Sean: Right. This is something I've been thinking about a lot recently: How I can use the privilege I have to benefit and amplify the causes I care about, like helping those who've been hit hardest by the pandemic, and now focusing on the long-standing social issues of equal justice and Black Lives Matter? Plus, it's Pride Month, so I'm looking to see where I can put my dollars to help further the causes of my fellow LGBTQIA folks. So, a lot to do, a lot of places I want to direct money, but it's not easy to find the right places to put it, or to know if the organization that you want to donate to is legitimate. Especially because it seems like the organizations that need your help are changing by the day and sometimes even by the hour.

Liz: Yeah, this is like any other personal finance issue. There's far more places to put your money than you have money. So there has to be a little bit of winnowing going on. And one of the things that I really suggest doing is, upfront, figuring out what matters most to you, and Sean, you just did that.

You want to winnow it down for a number of reasons. One is that every time you donate to a cause, the cause incurs some expenses in processing that donation, and the expenses are pretty fixed. So if you, say, donate $10 to 10 different causes, each one of them is going to spend, let's say, a buck or two bucks to process your donation. What that winds up being is $10 or $20 of your total $100 donation that gets sucked away to those processing costs. Whereas if you pick one place to donate and donated the whole $100, then you'd only be spending $1 or $2 to donate that, so 98%, 99% of your money would get where you want it to go. So that's one of the reasons that you really want to winnow down which causes are most important to you.

Sean: Focusing on the causes and key organizations that you care about is also super helpful, so that you can spring into action and donate when they need you, on top of making your dollars go further. But that's not the only way that you can have your donations make a bigger impact. I've been really motivated by a lot of the people on social media who have posted receipts of a donation to an organization, who then asked people to go and match them. And that sets off a chain of donations, which is awesome. Also, some employers offer matching donations, where they basically will do the same. So if your employer doesn't offer that, now might be a good time to ask about it. But there is a flip side to all of these matches. It's that some organizations are actually being flooded with too many donations, believe it or not. So if you see one of these donation chains on social media, I would suggest seeing if that organization or GoFundMe, or whatever it is, has already met its goal, and if a smaller organization could benefit more from your help.

Liz: Yeah, that reminds me of when I was up in Alaska and the Exxon Valdez disaster happened. I was down in Valdez, and they were trying to put together the wildlife rescue. And the word went out that they needed some rags and what happened was that tons and tons and tons and tons of rags got sent up to Alaska by people all over the country who cared about the birds and cared about the animals. The problem was, there was no place to put this generous outpouring, you know, of support. So it's really easy for, as you said, some charities to get the bulk of the money and other charities to be really struggling, especially this time. A lot of charities were already struggling because of the change in the tax law. So most people can't write off their donations anymore. And then you had the pandemic on top of that. It's been one of those situations where everything is going wrong at once. So a lot of these charities could really use your help. One of the things you want to do, though, is to make sure that you're giving to a charity where most of your money is going to the cause you care about. You need to go on a watchdog site like Charity Navigator to check out the nonprofit organization before you give money to it.

Sean: Right. Vetting where you're donating your hard-earned money doesn't take a ton of time, and it's well worth the effort so you can actually help the people and organizations that matter to you and not line some scammer’s pocket. Here's one example that I saw in the past week: There was a bail fund circulating around online that purported to help people arrested during the protest in D.C. post their bails. The problem is that D.C. effectively doesn't have cash bail, so there's no need for such a fund. Although it can be really easy to impulse donate, take a second and see whether the donation page is legitimate. But if you can find the right place, your money can go really far.

Liz: Yeah. And another thing to think about is that it's really easy to give on impulse. And then when something that's actually more important to you comes up, you don't have the cash to do so. I'm a really big fan of setting at least some of your donations up to be monthly and to go on throughout the year. So with the causes that are most important to me, I set up regular donations. And I want to put a pitch in here for supporting the journalism outlets near where you are. I support public radio, public TV, I have subscriptions to three newspapers. And all of that is to make sure that good solid information is getting out to the community. That's super important. And I want to support that. And those come through monthly donations or, in the case of the newspapers, it's not a donation, it's a subscription. But you know, same diff.

Sean: And if you're not in a place right now where you can donate money, you can still donate your time and your energy and your passion to making the change that you want to see in the world through reading books about anti-racism or other causes that are important to you, and having conversations with your loved ones because we're in a world that has been trained to think a certain way over centuries. And there's a lot of re-learning and unlearning that's happening right now, and this is the time to do that. Take a moment to sit and read and educate yourself so that we can make the world that we want in the future.

Liz: Well said, Sean.

Sean: I will now step off my soapbox and let's get to this episode's money question which comes 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?" Skye, that is a great question, a big question, and one that makes me anxious just reading it. And I've got to say, it makes me glad that my dog and my gecko and my cat are the only babies that I have to worry about. And fortunately for me, their expenses are pretty predictable.

Liz: And babies are not predictable. But the good news is, it doesn't have to be scary. There are ways to plan and to get ready for your new baby.

Sean: Yeah, and while this may not be my area of expertise, we have just the Nerd to answer your question, Skye. On this episode of the NerdWallet SmartMoney podcast, we're talking with Kim Palmer, a Nerd who has three little kids running around her house right now. So she is very familiar with this situation, and she is here to help you.

Liz: I can't wait to hear what she says.

Sean: Let's get to it. Hey, Kim, welcome back to the show.

Kim Palmer: Thanks so much for having me. I'm excited to be here.

Liz: And we're excited to have you. When we got this question, we knew exactly the Nerd to bring on the show, and it was you.

Kim: Thank you so much. I'm so excited to talk about this. It's definitely one of my favorite topics. As Sean said, I have three children, and one is still a baby, and there's a lot that you can do to make the costs more manageable.

I think the biggest cost, and the one that you want to start thinking about as soon as possible, is the cost of child care. And of course for some people, they don't have this expense because they choose to stay home and not work for a period of time to stay with their babies. And if that's the case, then you have the expense of giving up that lost income. So there's really no way around it — you're either paying for child care or lost income, and you have to prepare either way.

So that's a really big financial hit to start preparing for. Child care costs do vary widely. So it really depends where you live. In a city like the one I live in, Washington, D.C., it can cost as much as $2,000 a month to send your infant to daycare, so that is a really big expense.

Sean: You can't see it right now, but my face is one of pure horror hearing that number. That's a ton of money. I mean, that's more than my mortgage payment or my half of it at least. And I mean, I've heard that it can cost around a quarter of a million dollars to raise a child to 18. I think that's an estimate from the USDA. Is child care factored into that?

Kim: Child care is factored into it, but only for families who have that expense. So that's why it's undercounted in that study, because of course not everyone has that expense, and if you are giving up your income because you're staying home with your child, that can be just as huge or even a bigger expense for you as a family. And that is not factored into that overall number.

Liz: A lot of people look at those child care expenses and think, “My whole paycheck’s going out the window or half my paycheck, I might as well stay home.” The calculation is actually a little bit more complicated than that. You've got to keep in mind that this phase of your life and your child's life only lasts for a few years, and if you drop out now, it's going to be really hard to get back into the labor market. If you stay in, your career is going to continue to advance, you're going to get raises, you're going to have access to benefits like 401(k) for saving for retirement, and down the line, when the child care expenses drop out, you will be much further ahead. So I know there's lots of things that go into the calculation of, “Do I stay home, do I not?” But if it's just child care and if it's just the amount of your paycheck that's going out the door, think about the long term — don't just think about the next few years.

Kim: Yes, I think that's such a good point to make, and it's one I'm already seeing with my older children. As soon as they start school, those day care costs go away. Of course there are other expenses, but at least you don't have that huge expense every month. So that's such a good point to make. The stats from the USDA, they do include things like your everyday costs on housing, clothing, food. To me, it really seems like my kids need me to buy something for them almost every day. It just seems like they're not just asking for things, but they legitimately need things, like my baby needs diapers for example. And so my husband and I, we always joke about what in the world we could do with that money, like go on vacations, if we didn't have these children.

Sean: On the flip side of that, my partner and I, when we're on vacation, joke about how he couldn't ever do this if we had a child. So you are totally correct in that hunch. But speaking of all these expenses, I was reading an article about how one of the biggest and unexpected expenses is just how much people spend on laundry detergent because they're constantly cleaning things for their babies. It's these small things that you don't realize totally add up to a lot more than you would ever want to spend on laundry detergent. But I'm wondering how you fit that into your budget when you may not know how much you're going to be doing laundry for your kid?

Kim: Like with most things, I really like the 50/30/20 budget. I use this for almost every big life expense, and basically it's just a way to think about where your money is going and how to organize it. So it basically means 50% of your take-home pay you want to put toward your needs, 30% goes toward wants, so that's things like take-out at the end of a long day, and then 20% is going toward debt payments, if you have any, and savings. And when you have kids, that savings category changes as well because you might want to start saving into a 529 college account, for example, for that down the line. So having a kid affects all of those different categories, but I think using that 50/30/20 budget is just a helpful tool to start to think about it. And it also helps you explain to your kids when they want something, as soon as they get old enough to talk, when they start asking for things, it explains to them, "No, that's not a need," or, "that's a want," and just helping them understand that difference.

Kim: My son, who's 7, is constantly asking me for an Air Force pilot's jacket. I think his best friend has one. And I keep telling him, "It's not something you need. So no, we're not going to. Maybe you can ask for that for your birthday, but no, I'm not just going to get that for you."

Liz: Well, the good news with babies is they don't have opinions on fashion, so that's good.

Kim: Yeah.

Liz: They do have opinions on what feels good and what doesn't, so that's something to keep in mind. Sometimes those laundry detergents that cost a lot, they actually help the clothing feel a little better. So there's a reason why we overspend on laundry.

Kim: Yes.

Sean: Yeah, that's totally fair. And yeah, you're totally right, Kim. I love the idea of applying the 50/30/20 budget to a baby budget as well. I mean, we talk about this budget a lot because it is so flexible. But going back to Skye's question, I'm wondering how you plan for those initial baby costs when your budget is probably completely in shock after having a kid?

Kim: I think for a lot of the initial costs with the baby, they are relatively predictable. So you know you're going to need things like diapers, you need a safe place for the baby to sleep, they're going to need clothes and a car seat. So you can make a basic list that helps you plan ahead of time.

And one big tip is to look for those big ticket items gently used. So a lot of times families that had a baby a few years ago, they're just growing out of some of those items. So maybe they don't need their crib anymore, and you can pick it up for free. So connecting with your community, whether it's through an email listserv, Facebook, can help you pick up those gently used items. You do, of course, always want to make sure that they're safe. So you want to make sure you're not getting anything that's on a recall list. In the case of a car seat, you want to make sure it hasn't ever been in an accident. So as long as you follow the basic safety guidelines like that, you can get these items for a lot less than you would if you were buying them new.

Liz: Yeah, I was kind of astounded at other parents’ generosity. We got so much. We got a jogging stroller, we got a crib, we got a lot of big bulky toys and it took awhile for me to realize that these other parents are really happy to get that stuff out of their house. It's bulky — it takes up space. So it is generous, but there's a reason behind it, and you will, in turn, turn around and give up a lot of things and give away a lot of things. So only a few of the things that you have need to be new. I basically wanted a new car seat because you really don't know if it's been an accident or not, and I think a breast pump was the other thing that everybody said. "OK, buy that new." Anything, almost everything else, you can either get as hand-me-downs or used from the sources we've been talking about.

Kim: One thing to consider, too, is that if you go shopping at a big box store aimed at new parents who are expecting babies, you will get a list from them of all of these items that they suggest that you buy. And honestly, I didn't even recognize half of these items when I looked at it. There are things like baby wipes warmers. I've never owned that for any of my children and they seem to be fine. So there's just a lot suggested that you purchase that you actually do not need.

Sean: Yeah, it's all to help their bottom line at the expense of yours, really. I know there are some young moms and dads and parents of any gender who may not want a used item. Just conceptually they have an issue with something like that. Do you have any tips for people who insist on new in terms of making the car seat, the stroller, all of that more affordable?

Kim: That is so interesting to hear that because I have always just been so grateful to get this stuff in any form. I think as soon as you start realizing how much you need and what a short time you need it for. So, for example, my baby used an infant swing for all of two or three months and those things are over $100. And so I was happy to have one that had spit up on it from another baby just because it meant that I didn't have to buy a new one. So I think you get used to that. You get over that desire for new things as soon as you start having to buy the stuff.

Sean: My look of horror has returned. But one thing that we have for you guys is a calculator that can help you crunch these numbers to figure out how you can make the first year of being a parent a little bit less shocking to yourself and to your budget.

Liz: And you're going to come up with a lot of hacks. I mean, as Kim said, that first year, you're going to be learning so much. You're going to get advice from other people, other parents, whether you want it or not, so try to cull the best ideas from all the onslaught of advice you're going to get. And, again, I'm going to put a pitch in. I know there are people who love to have things new, but it's only going to be new for a few seconds, until the kid spits up on it. So as much as possible, go for used, go for hand-me-downs.

Sean: And even with buying clothes, if you know you're probably going to have more than one kid, and you're just going to wait a couple of years, I think it's really smart to buy clothes that are in gender-neutral colors and toys that can work for any child so that way you can reuse them down the line. But I do have one question for both of you guys. So what is one totally unexpected expense that popped up when your kids were younger that you think other parents should probably plan for?

Liz: I had no idea how often we were going to be in the doctor's office. And that's not even when your kid is sick. It's just all the checkups and all the stuff that you have to do to keep them in good health. We had good health insurance, so it was only the copay, but still, that can add up over time.

Kim: Definitely. Another one that really surprised me is just how much it costs to feed them, even though they're little tiny babies. Breastfeeding you'd think is totally free, and of course it can be totally free. But a lot of people need things like a lactation consultant to help make sure that it starts out working smoothly. You might need to buy not just a breast pump, but also accessories. And then if you use formula, it's surprisingly expensive just to keep that baby having all of the bottles that it needs. And then once they start eating real food, around six months or so, it's really easy to spend a lot on all of those little food pouches. It's a brief period when they use those, but they are expensive. And so I just am surprised how much a little person can cost you in terms of food.

Sean: Yeah, I can't even begin to imagine. Those are really interesting tips. OK. Well, thank you so much, Kim, for talking with us. I'm wondering if you have any final words of wisdom for soon-to-be parents or new parents.

Kim: I think my main message to Skye and anyone else preparing to start their family soon is that it's so helpful to start living on less even before the baby arrives. So as soon as you know you're expecting a baby, putting money aside every month. If you can, put aside the amount that you will be spending on child care costs, because then you can get used to living on less. And then you also have a cushion so when the baby's born, that cushion can help you buy some of those initial expenses without shocking your budget too much. Most of all, congratulations! It's such an exciting time, and you'll definitely be able to figure all this stuff out.

Liz: Thanks so much for your help, Kim. Now it's time for our takeaway tips. Takeaway tip number one, start planning and saving as soon as you know you're pregnant. You can use our baby cost calculator to get some idea of the first-year expenses.

Sean: Second tip, don't go overboard buying stuff. Check in with more experienced parents about what's a necessity and what isn't.

Liz: And finally, look for gently used clothes and gear, including hand-me-downs. Some stuff should be purchased new, like breast pumps and car seats. Otherwise, save some money and the planet.

Sean: And that is all we have for this episode. If you have a money question of your own, turn to the Nerds and call us or text us at (901) 730-6373. That's (901) 730-NERD. You can also email us at [email protected], or even send your voice memos to that email address. Also, visit for more info on this episode, and be sure to subscribe, rate and review us wherever you're getting this podcast.

Liz: And here's our brief disclaimer, thoughtfully crafted by NerdWallet's legal team: Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This Nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Sean: And with that said, until next time, turn to the Nerds.