The decision to have a baby is a big one, and one of the least understood aspects of child-rearing is “how much will it cost?” While some of the underlying costs of raising a child remain constant, a wide range of factors influence what you’ll actually pay for prenatal care, delivery, and raising a child to age one. This guide will help you to understand and plan for these expenses with an integrated baby cost calculator tool.
In this article, we’ll show you how to:
- Estimate your medical costs
- Anticipate the financial impact of taking maternity leave
- Budget for the ongoing costs of taking care of a newborn
While becoming a parent is one of the most surprising endeavors you will ever take on, planning for some of life’s certainties can make the experience less stressful and more fulfilling over time. And by estimating your costs, you’ll be in the best position to provide for your child – and your family – over the long haul.
The Rising Costs of Having a Child
A recent U.S. Department of Agriculture report pegged the cost of having a baby– and raising that child to adulthood – at $245,340 in 2014. This estimate includes a rough calculation of the costs of food, housing, childcare and education, and other child-rearing expenses up to age 18.
The report, issued annually, is based on a wide variety of inputs that make up the government’s consumer expenditure survey, which tracks the cost of household expenses each year. While the figures contained are alarming, government officials believe it’s crucial for parents to understand the full cost of raising a child if they hope to be prepared for parenting.
“In today’s economy, it’s important to be prepared with as much information as possible when planning for the future,” said USDA Food, Nutrition and Consumer Services under Secretary Kevin Concannon in a press release.
It’s not just bottles and diapers you’ll have to worry about, notes the USDA. Hopeful parents need to calculate future costs of everything required to take adequate care of their child through infancy to adulthood, and that includes daycare, clothing, nutritious food, and medical care. Not surprisingly, and as the report shows, none of those comes cheap.
But those expenses don’t fall on every American family in quite the same way, the report notes. While highlighting the average cost of raising a child, the government report does leave room for geographical variations and individual circumstances. For example, living in a high-cost region or a major urban center could dramatically drive up the cost of everything from food to child care compared to a family who lives in, say, a rural part of the Midwest.
Estimating the Costs of Prenatal Care and Delivery
Prenatal care is health care provided to both you and your baby during your pregnancy. The benefits of receiving this type of care cannot be understated. In fact, the U.S. Department of Health and Human Services reports that a lack of prenatal care makes it three times more likely a baby will have a low birth weight and five times more likely a newborn will die in the womb or shortly after birth.
When you’re ready to try and have a child – or as quickly as possible after you find out you’re pregnant – you should seek out prenatal care from a qualified physician or clinic. Where you receive your care will depend on a wide range of factors including your location, the type of insurance you have, and quite possibly even your income.
Here’s the good news: Where it was once difficult for women to secure maternity coverage on the individual health insurance market, the passage of the PPACA, or Patient Protection and Affordable Care Act (commonly called Obamacare), ensures maternity care as one of the essential benefits provided in all health plans. In other words, all plans that are compliant with the law now include maternity as a default, and individuals no longer need to purchase a maternity rider for their policies.
Prenatal Care with Health Insurance
Most women will access prenatal care through their state or federal insurance marketplace, a private insurance plan provided by their employer or a spouse’s employer, or Medicaid. Here’s what you might expect from each of those scenarios:
Marketplace coverage is available for individuals and families who are not offered health insurance through an employer. Currently, national health insurance is supported by 13 state-based marketplaces, four federally-supported marketplaces, seven state-partnership marketplaces, and 27 states which sell plans through federally-facilitated healthcare.gov.
For the 2015-16 enrollment period, individuals are able to purchase qualified plans through January 31, 2016. After that time, however, enrollment is closed until the following year unless you experience a qualifying life event — such as a pregnancy. Healthcare.gov includes the following life events as qualifiers for special enrollment coverage:
- If you have a baby, adopt a child, or place a child for foster care: Your coverage can start the day of the event – even if you enroll in the plan up to 60 days afterward.
- If you get married, lose health coverage, move to a new state, or qualify for a Special Enrollment Period another way: Pick a plan by the last day of the month and your coverage can start the first day of the next month.
The prices of plans offered through state and federal exchanges will vary based on your age and where you live. Currently, subsidies and cost-sharing may also be available for families who earn less than 400% of the federal poverty limit (FPL) each calendar year. To find out if you qualify, visit your state exchange website or input your information into healthcare.gov.
The key to understanding the total out-of-pocket costs for prenatal care and delivery is nailing down the specifics of your plan. For example, the health plan you choose will include:
- A monthly premium: The amount you’ll pay each month in order to remain covered.
- An annual deductible: The annual out-of-pocket amount you’ll need to pay before your insurance covers the remainder of your costs.
- Co-insurance: A percentage of costs most plans require you to pay until you reach your deductible.
- Annual out-of-pocket max: The maximum amount of money you should expect to pay in any calendar year in addition to your monthly premiums.
To see how marketplace coverage would help a family cover the costs of delivery, let’s look at an example. The following scenario outlines how much a silver marketplace plan would cost without subsidies for a couple, both age 35, in Hamilton County, Indiana.
- Premiums: $580 for a couple per month, or $6,960 for the year.
- Deductible: $5,000 annually.
- Co-insurance: 30%. This means 70% is covered by insurance and you’ll pay 30% of each medical bill out-of-pocket until you reach your annual out-of-pocket max.
- Out-of-pocket maximum: The annual out-of-pocket max for this particular silver plan is $11,000.
In the state of Indiana, the average cost for childbirth and a hospital stay is $9,997. However, costs can vary widely across the state, including at St. Vincent Carmel, in Hamilton County, where the average cost of vaginal delivery has surged to $16,947 in recent years.
Considering an average cost of $10,000 for delivery and a hospital stay, this couple would be required to pay their full $5,000 deductible. After that, their marketplace plan would cover 70% of the total until they reached their annual out-of-pocket max. This means the couple would also need to cover 30% of $5,000, or $1,500, in addition to their deductible. In total, they would pay $6,500 out-of-pocket for delivery, on top of the $6,960 they pay in premiums for the year. This is also in addition to any co-pays or additional cost-sharing measures included in this couple’s plan.
If your employer offers health insurance coverage, you’ll need to study your plan in-depth to understand your out-of-pocket costs. Get started by reaching out to your human resources department or accessing your plan’s materials online. You can also call the number on the back of your insurance card to verify your deductible as well as co-pays, co-insurance, and other variables.
If you don’t earn enough to qualify for a marketplace plan but aren’t offered health insurance through your place of employment, you may qualify for Medicaid coverage that includes thorough prenatal care and assistance with delivery.
Income requirements for Medicaid eligibility vary by state, according to the U.S. Department of Health and Human Services. Some states expanded Medicaid to allow more people to qualify upon passage of the Patient Protection and Affordable Care Act.
To verify Medicaid eligibility, HHS.gov recommends visiting your state Medicaid website or filling out a healthcare application at healthcare.gov to see if you’re rerouted to a local or regional Medicaid office. This page on healthcare.gov can also show you the likely income threshold for Medicaid eligibility in your state. In the state of Florida, for example, a family of four would need to make less than $24,250 in 2016 to qualify for coverage.
Pregnancy Costs for the Uninsured
Prenatal care and delivery costs are shockingly high even for those with insurance, but can be devastating for those who go without. If you’re worried you won’t have coverage, the U.S. Department of Health and Human Services lists several resources you can access for information on low-cost or charitable prenatal care. According to WomensHealth.gov, every state offers a program that provides help for women who are struggling to find – or afford – coverage. To find out about these programs, you should:
- Call 800-311-BABY (800-311-2229) to connect with the Health Department in your area code. (Llamar 800-504-7081 si necesita ayuda en español.)
- Contact your local Health Department to inquire about available programs.
Beyond these options, the Children’s Health Insurance Program (CHIP) may be able to help you find low-cost medical care. Call 877-543-7669 for more information.
How to Reduce Maternity Costs
While some of the costs of prenatal care and delivery are inevitable, there are just as many ways to save as there are to spend. If you hope to keep your out-of-pocket expenses under control, consider these tips:
- Get to know your plan. As soon as you become pregnant, get acquainted with your health plan’s specifics. Know your deductible, annual out-of-pocket max, and co-pay information so you can start saving and preparing right away.
- Open an HSA, or health savings account. If you have a high-deductible health plan that qualifies for an HSA, you can open a tax-advantaged health savings account to decrease the financial burden of having a baby. For 2016, individuals with a HDHP can stash away $3,350 in an HSA, while families can put away a max of $6,750.
- Follow doctor’s orders – and take care of yourself. While pregnancy is an expensive condition, you can usually bring costs to a minimum by taking optimal care of your health. Follow all doctor’s orders regarding diet, exercise, and prenatal care, and you’ll be in the best position to avoid costly complications and side effects of pregnancy.
- Stay in-network. Most health plans offer the lowest out-of-pocket costs to individuals who seek medical care only within their approved network of doctors and hospitals. If you opt for a doctor or hospital who is out of your network, you’ll pay considerably more.
- See if you qualify for WIC. WIC (Women, Infants, and Children) provides nutritional assistance and health care referrals to low-income pregnant women, infants, and children up to age 5. Call yourlocal WIC office to see if you qualify for assistance.
- Question charges and analyze bills. The increasingly complex state of our medical care system requires increased scrutiny of any bills that come your way. With so many inputs and outputs, there’s no doubt billing errors are made every day. To make sure you’re never overcharged, question any expense you’re unsure of.
- Take advantage of freebies. OBGYN offices, hospitals, and maternity centers often offer samples or freebies to patients in their care. While they may not add up to much, taking advantage of samples is one way to lessen your costs while trying out new products.
- Accept hand-me-downs. Adorable baby outfits practically call your name when you’re pregnant and ready for delivery, as does new baby gear, strollers, high chairs, and more. But if you want to save money, gladly accept any hand-me-downs you’re offered. Your baby won’t mind if his or her items are used, and you’ll save a lot of money by not buying new.
- Open a flexible spending account, or FSA. If your employer or your spouse’s employer offers a FSA, you may be able to set aside up to $2,550 per person of your pre-tax annual salary ($5,000 if both spouses have the option). You can use this money for medical care or supplies while gaining meaningful tax savings.
- Plan for maternity/paternity leave. Understanding your company’s leave policy is crucial if you hope to rein in the costs of missing work for maternity or paternity leave. Ask your employer about their policy, and figure out what that means for your finances. If you need to take any time off completely unpaid, you can start saving for it now.
Cost of Raising a Child Calculator
While the costs of prenatal care through age one can vary widely depending on your location, health, and personal tastes, it’s possible to estimate these expenses based on certain criteria.
The amount of money you’ll spend depends on several factors, including:
- The number of children you have
- The age of your children
- Your household income
- The average cost of living (COL) in your area
To gain the biggest advantage from our baby cost calculator, you’ll want to understand its inputs and how they relate to your personal situation. Here’s how we break down each factor, along with a brief explanation.
- The number of children you have: Studies show that each child after your first costs 30% less. After all, you’ll likely already have baby basics such as a crib and stroller, and you can often receive a discount on child care for multiple children.
- Your zip code: Where you live will determine your purchasing power and overall cost of living.
- Ownership of equipment and supplies: This section estimates the general costs of owning and using a variety of baby gear, including strollers, cribs, clothing, and furniture.
- Maternity and paternity leave: Will one parent need to take unpaid time off after your child is born? How will your employer’s maternity leave policy impact your income?
- Diaper strategy: Whether you plan to use disposable or reusable diapers will impact the overall costs of raising a baby to age one.
- Childcare costs: The cost of part-time of full-time daycare varies widely from coast to coast. Knowing how much you’ll pay can help you prepare.
- Medical costs: Estimate your cost for delivery and prenatal care.
What Your Baby Really Needs Through Age One
Your baby’s needs will vary from the moment of birth to age one. If you hope to keep expenses under control, it’s best to be prepared. WomensHealth.gov offers practical tips for what to have on hand at the hospital and beyond.
What to have at the hospital
- An undershirt, as well as a nightgown, stretch suit, and several onesies
- Socks and booties
- Receiving blankets, caps, and heavy blankets in cold weather
- Diapers and wipes, although the hospital will likely provide these as well
- A government-approved infant car seat
Must-haves: 0 to 3 months old
- Crib linens
- Play pen or portable crib
- Clothes hamper
- Baby monitor
- Night light
- Diapers (cloth or disposable)
- Baby wipes
- Thermometer (digital or rectal)
- Washcloths and burp cloths
- Baby bath tub
- Fingernail trimmers
- Hooded towels, soft
- Diaper rash cream
- Bulb syringe
- Breast pump
- Bottle sanitizer
- Baby shampoo and lotion
- Baby wash, tear-free
- Sweater or jacket
- Body suits, rompers
- Long sleeve shirts
- Baby swing
Must-haves: 3 to 6 months old
- Baby feeding equipment
- Stimulating and interactive toys
- Teething ointment and rings
- High chair or feeding chair
Must haves: 7 to 12 months old
- Baby gates
- Outlet covers
- Babyproofing equipment
- Cabinet locks
- Sippy cups
- Snack containers
While the “idea” of having a baby is likely dreamy, the reality is, babies are equal parts joy and responsibility. Your baby will make you feel loved, bring you happiness you never imagined, and give you a sense of purpose. You, on the other hand, are charged with providing for your baby’s needs including medical care, clothing, food, and shelter.
With that being said, many of the costs that come with having a baby aren’t set in stone. There are many ways to save money including the pursuit of used clothing and gear, cloth diapering, buying in bulk, and breastfeeding. The ways you can save while having a baby are too numerous to count, and can drastically cut your costs.
With a new baby in the home, you have a world of new tasks and expenses to plan for. However, you have one factor working in your favor – you’ve got time. With 18 years of child-rearing ahead of you, now is the time to start planning for the financial aspect of your child’s life.