Smart Money

An average family spends approximately $6,200 on baby products during a child's first year.

Having a baby is one of the happiest events in life. The expenses that come with it, however, can strike fear in the hearts of prospective parents. But with some research and planning, you should be able to have your baby and raise her without breaking the bank. Following are seven steps to get you started.

Step 1: Start an emergency savings fund. A cushion of three to six months’ living expenses safely tucked away will give you peace of mind in case of a job loss. Evaluate your and your partner’s job security and then stash as much money as possible each month into a savings account or money market fund to cover unexpected interruptions in your income.
Step 2: Evaluate your life-insurance needs. Think about what would happen if you or your partner were to die. How would the bills get paid? Who would take care of your child? Each wage earner in your household should have term life insurance equal to about seven times his or her annual income. A stay- at-home parent also should carry life insurance to cover child care and housekeeping so the other parent can work.
Step 3: Research your health-insurance coverage. Find out what your health plan offers regarding pregnancy and giving birth. Determine your out-of-pocket costs for doctors’ fees, hospital services, medical procedures and drugs. Look into unexpected circumstances such as Cesarean delivery, and don’t forget about the baby: She’ll need a newborn pediatric exam and frequent checkups, including vaccinations. If you are self-employed, it’s best to find out before you get pregnant whether your health insurance offers maternity benefits. Many policies require the purchase of a pregnancy rider before conception. (A rider is an extended policy that covers specific benefits.) Find out if the rider covers the cost of doctors’ visits, prenatal care and baby care.
Step 4: Estimate first-year expenses. The average family spends about $6,200 on baby products during a child’s first year, according to Denise and Alan Fields, authors of Baby Bargains (Windsor Peak Press, 2003). This amount includes clothes, diapers, baby furniture and other nursery items, but not the cost of child care. Their information comes from a survey of parents, government statistics and estimates by companies in the baby-products industry. You can spend less than this, of course. Through a combination of smart shopping and sales resistance, you can keep your first-year budget under control.