A recent report by personal finance website NerdWallet finds that most parents dramatically underestimate the cost of a baby’s first year.
Findings from the study showed that the cost of a baby’s first year can range from just over $20,000 up to nearly $52,000, depending on a family’s income. But many parents aren't prepared to face such high costs.
The poll showed that 18% percent of parents -- including those who are currently pregnant or planning to have a baby the next three years -- thought their little one’s first year would cost less than $1,000. Roughly half of parents (54%) thought it would cost less than $5,000.
To come up with its findings, NerdWallet broke down the expenses of a baby’s first year in two sample households -- one with a $40,000 annual income and one with a $200,000 income. At both income levels, families underestimated the expenses associated with raising a baby.
Most parents thought diapers and wipes would be the biggest expense -- but at $743, it’s actually one of the smallest expenses. Full-time child care usually turns out to be the largest expense, setting parents back an average of $8,059.
A majority of parents (61%) expect friends and family to contribute more than 20% of the first year’s costs. But parents often regretted not setting aside more money prior to having a baby.
For many parents, misjudging the cost of food, housing, transportation, diapers, and health care in a baby’s first year led to financial regret. Nearly 3 out of 10 parents had no money saved before having their baby to help with the costs of the first year; 28% had less than $2,000 saved.
Parents also wished they had taken more financial action during the first year of their baby’s life. For one-third of parents, the biggest regret was not starting a college fund for their kiddo.
NerdWallet's cost estimates of a baby's first year may spark some degree of sticker shock amongst would-be parents, but it's also important to note that families could spend more or less depending on their spending habits.
To see the cost or raising a baby in year one based on your spending preferences and location, check out NerdWallet’s baby calculator.