Becoming a Parent: The Financial Considerations

Here is a breakdown of the items you'll need and an estimate of their cost. The costs are categorized chronologically, according to the child's age. These estimates are for a first child. Second or third children typically cost less because many items can be reused. Families with three or more children spend about 22% less per child on average. With multiple births, expenses will be higher than (although not double) those of a single birth.

Government estimates say that a middle‑income family in 2015 (annual income between $59,350 and $107,400) will spend a total of $233,610 on raising a child to age 17. This does not include expenses beyond age 18. Adding college costs increases the total significantly, and higher‑income families generally spend more.

Planning Aid: For an estimate of the amount you would have at college entry if you begin saving now, use a college savings plan calculator.

Here are the costs you can expect up to birth and during the first year. For later children, furniture, clothing, and toy costs tend to be lower; health care, child care, and food are similar.

Hospital Costs

According to Fair Health (2018), an uneventful delivery in the U.S. averages $12,290 for a vaginal birth and $16,907 for a C‑section. Actual costs vary by insurance coverage and complications.

Baby Supplies and Equipment

Moderately priced crib, changing table, and swing/bouncer: about $1,200. Stroller: about $400. Infant car seat: $150–$200. High chair: $150. Layette and basics (washcloths, sheets, blankets, towels, onesies, etc.): several hundred dollars. Consider diaper service, cloth, or disposables.

Feeding and Diapers

The American Academy of Pediatrics recommends exclusive breastfeeding for at least six months. Nursing supplies may include bras and pads (~$50) and a nursing pillow (~$25). A hospital‑grade pump for returning to work can cost around $400. Comparable formula costs are about $1,350 per year for ready‑mix powder and well over $2,000 for ready‑to‑serve, plus bottles (~$90/year) and nipple replacements (~$40/year). Diapers: disposables average ~$850 per year for the first two years; cloth is generally cheaper. A diaper pail adds about $40.

Child Care

Costs vary widely. Daycare centers generally cost less than a live‑in nanny (except with multiples, where a nanny/au pair may be cheaper). A mid‑priced daycare can approach or exceed $20,000 per year.

Health Care

Expect roughly six doctor visits in the first year (well‑baby and common illnesses). Your out‑of‑pocket costs depend on your insurance.

Toys and Clothes

Plan for $500–$600 during the first year, beyond the initial layette.

Total for the First Year

Approximately $15,000–$18,000, with health care being the largest variable.

Expect about $1,000 on toys/clothes and roughly $2,200per year on food. If using daycare or preschool, add those costs (daycare in many areas can approach $20,000 per year or more). Health care depends on your coverage.

Overall expenses often dip as child care costs decline. Health care stabilizes unless orthodontia begins. Clothing, toys, and entertainment may rise modestly, but big‑ticket teen items are not yet common. Food typically increases only slightly. Consider activity costs (music, sports) and potential private school or camps.

Expect higher spending on food (growth spurts), clothing (greater interest in appearance), and entertainment. Auto insurance increases once your teen starts driving (often $300–$1,000 more). Consider potential costs for milestone events and activities (e.g., orthodontia, SAT/ACT prep, lessons, sports, application fees).

Start early. Consider allowances, with or without chore requirements, and let kids manage their own money—experiencing the consequences of choices. Typical ranges: around$7/week in elementary school and $12–$20/week in junior high (parental discretion varies).

Begin with a simple passbook savings account. To introduce investing, consider child‑oriented mutual funds or individual stocks and make statements part of learning. A parent “match” (e.g., $0.50 per $1 saved) can build habits.

To hold assets for minors, use a custodial account (UGMA/UTMA, state‑dependent). The child owns the asset; the custodian manages it until majority (18 or 21 depending on state) and must act in the child’s best interest.

IRAs for Kids

Children with earned income (e.g., babysitting, paper route, family business) can contribute to a Traditional or Roth IRA (subject to annual limits). Because of long time horizons and tax deferral, early contributions can compound meaningfully. Parents can gift funds to replace earnings contributed, and a tax return may be required.

Early withdrawals generally face taxes/penalties unless exceptions apply (e.g., qualified education expenses, certain medical costs, or health premiums while unemployed).

Kids can learn to use ATM cards and, with parental guidance, begin responsible credit card use and small family loans. Involve them in tax filing when applicable (e.g., IRA contributions) to demystify taxes and show how government services are funded.

One side benefit of practical money management is avoiding “math phobia” later on. Professional guidance is wise for major life changes such as marriage or divorce.

Source: Expenditures on Children By Families 2015, U.S. Department of Agriculture, Publication No. 1528‑2015. Before‑tax income $59,200–$107,400 (Avg. $83,300).