Millennials make up most of today’s new parents and parents-to-be. Having come of age during the Great Recession and holding more student debt than any previous generation, 18- to 34-year-olds face a unique set of challenges when paying for the first year of parenthood.
Members of the millennial generation have clear ideas about how they’ll prioritize parenting costs, but many underestimate just how much they’ll have to spend, a new NerdWallet analysis finds.
The cost of raising a baby during the first year could total $21,248 in a two-parent household with a $40,000 annual income — or $51,985 in a household bringing in $200,000 — according to the analysis. About half (49%) of millennials project these expenses will total less than $5,000, a related Harris poll found.
But there’s good news: Millennials want to set aside money for parenting costs, the study finds, and they can take steps to make that happen.
Millennials plan to save for baby
Overall, young people are saving for baby, or at least planning to, more than any other age group did when they were expecting their first child. Eighty-six percent of millennials with children or planning to have a child within five years said they did have money saved or plan to have money saved for their baby’s first year, according to the poll.
And 27% of millennials say saving for college and 24% say life insurance are top financial priorities in baby’s first year, more than any other age group, the poll found.
Still, good intentions only go so far.
Molly Steffensen, a 28-year-old stay-at-home mom in Tallahassee, Florida, says she was in tears before the birth of her first child because she didn’t have all of the items on a list of baby must-haves. “We didn’t have any money set aside for the first year of expenses,” she says, “just some money in the bank from my husband’s job at the time.”
It can be difficult to save when there isn’t much money. These tips may make it easier:
- Track your current spending. This can help identify splurges. Once you know where your money is going, it’s easier to see where you can cut back.
- Set realistic goals. After you’ve freed up some income for savings ahead of your baby’s birth, decide where you want it go: For example, you might set aside a month’s worth of diaper money or a week’s worth of child care payments each pay period. Any savings goal helps, as long as it’s reasonable given your income.
- Design a post-baby budget. Use an online baby calculator to estimate costs. Child care will likely be your biggest expense, so research the current costs of various child care options in your area ahead of time.
- Shop responsibly. Your child won’t know if he or she didn’t wear designer duds, and 35% of millennial parents wish they had spent less on toys during their baby’s first year. Thirty-three percent said the same of clothing, the Harris poll found.
- Ask for practical gifts. Friends and family will want to shower you with gifts, so ask for things you need, such as diapers and clothing in varying sizes.
Student debt colors spending during parenthood
“We entered the workforce during the biggest economic downturn since the Great Depression, and we’re shaped by that,” said Tom Allison, deputy director of policy and research for the Young Invincibles, a nonprofit focused on empowering the generation. Millennials also have the most student debt of any generation to date, says Allison. These experiences can shape how young parents pay for baby.
Steffensen and her husband, D.J., lived with his parents in Kentucky when she became pregnant with their first child. D.J. was working on his master’s degree, so their income was largely limited to student loans. “We’d occasionally run out of money, then use credit cards for a couple of weeks until we got another student loan or stipend payment,” she says of their first year of parenthood.
The family’s need to count on loved ones during that early period is common. Among millennials who are parents or who plan to have children in the near future, 88% said they’d expect friends and family to help with the costs of their baby’s first year, the Harris poll found.
Despite what they’re up against, millennials are “clear-eyed” about the challenges of financing parenthood, according to Allison. “It’s difficult for us to save for the future, but it’s also very important to us,” he says.
This article was written by NerdWallet and was originally published by USA Today.