Weighing the Expense of Bringing Up Baby

The arrival of a child comes with constant and surprising discoveries, some joyful and some … less so. And yet, you may find that it’s the predictable aspects of parenting that can be the hardest to navigate. First among them is the child care conundrum: Who will be the caregiver for the newborn? And how will you pay for that care, or make up the income if you opt to stay home? 

And of course, just how much will the baby cost? To get a handle on what your financial life will look like once your baby comes home, start stashing away extra money in the months before the baby’s arrival, says Lindsay Bryan-Podvin, a financial therapist in Ann Arbor, MI. “Figure out where that extra money is going to come from and put it into a savings account,” she says. “See what it feels like not to have that money—what happens to date night? What happens when you don’t go out?—and think about those changes and how they’ll impact your lifestyle and financial bottom line.” 

Deciding who will care for your baby on a daily basis is a deeply emotional question—and one whose answer may change as your child grows. Here’s how to determine the costs in question, and approach the caregiving conversation with your partner.

Examining the Costs
No matter how you slice it, child care is astoundingly expensive. Last year, the Center for American Progress, a Washington, D.C.-based think tank, released a report that pegged the average cost for infant and toddler care at a licensed daycare facility at $1,230 per month. And in some states, the costs are significantly higher than the national average.

The annual cost of child care can equal in-state tuition at many universities, according to research by Child Care Aware of America. Families with an infant and preschooler in a child care center in Massachusetts pay an average of $34,381 on child care annually.
 
Other child care options come with hefty price tags as well. Nannies earn an average of $13.63 per hour, according to reports from Care.com. That translates into more than $28,000 per year for full-time help, which is why some parents opt to share a nanny with another family to help defray costs. 

On the other hand, the actual price tag for staying home to care for your baby will add up to more than just missed paychecks—as any parent knows who has taken time out of the workforce, only to watch career opportunities sail by in the meantime. One study found that women who work continuously until they reach the age of 40 bring home about 40% more than those who opt to exit the workforce and come back later. 
 
Do Your Own Math
Keep those factors in mind, and also do the math to know the financial implications of staying home. While salary is the most obvious number to consider, be sure to add up all the hidden costs. 

While caregiving, you won’t be making contributions to Social Security or retirement. Does your employer cover your family’s health care? That’s a vital consideration, as employers pay an average of around 70% of their workers’ health insurance costs, according to a report by The Kaiser Family Foundation. Replacing that coverage with a private insurance plan means picking up the entire bill. Other compensation to total up includes matches to 401(k) contributions, bonuses and company supplied computers, cars and cell phones.

Start Talking About It Early
Of course, a discussion about child care will never truly come down to a pure financial analysis. This is your baby’s day-to-day care, and emotions can run high around these conversations. For that reason, experts suggest you start talking about your plan for Junior well before he’s on the scene. 

“If you don’t begin that conversation early, you might imagine you know what your partner wants to do,” says Bryan-Podvin. “And you could run into a lot of issues.” Chief among those issues may be unspoken expectations. Maybe one partner always imagined he would stay home with the kids—or had planned that you’d both keep working to maximize earnings. Conflicts come from not talking these things through, or thinking you’ve had the conversation, says Bryan-Podvin. To avoid confusion, make sure it’s a true sit-down conversation and not a fly-by one, she says.

Balance Emotions and Finances
As any parent will acknowledge, there’s an emotional cost around child care. And making an emotional decision can be okay so long as you can tighten up your budget to make it happen. So if you really want the very expensive nanny because it feels like the right fit for your family, try to make it happen. “You might finagle a way to make it work for three to five years with a tight budget,” says Bryan-Podvin. “But the only time the money wins out is if you’re going to put yourself in financial strain.” If you’re going into debt or stop saving for retirement, for example, that’s damaging in the long run, she points out.

Since money and kids are all too commonly fought over, reach out if you and your partner find yourselves stuck in a disagreement about child care. “If you feel like you’re at an impasse, therapy is available through most health insurances or employer assistance programs. Or reach out to your church or temple, or find support available online. Just so it’s not me vs. you,” says Bryan-Podvin.

Set Aside Time to Revisit Your Decisions
Once you’ve come up with a plan, keep the child care conversation open, but also contained, Bryan-Podvin advises. “Allow time to talk about child care or daycare and the parenting partnership,” she says. “But don’t talk about it every single day. Carve out time for it.” To help keep the conversations contained, Bryan-Podvin suggest covering them in specified weekly or monthly meetings.

Whatever child care agreement you come to, build in time limits to discuss and reconsider the plan, Bryan-Podvin says. “Make sure to revisit the arrangement at intervals,” she advises. “Check in on how it’s working for you, for the kiddos, and your finances regularly.” That way no one feels they’re locked in for the next 18 years. After all, you don’t know how you’ll feel when you’ve been missing your baby when you’re back in the office—or been missing your work when you’ve decided to stay home. 

A former editor at Los Angeles magazine, Chris Warren's writing has appeared in publications ranging from Institutional Investor and Forbes to National Geographic Traveler, Oxford American and Greentech Media.

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