How Much Does it Cost to Have a Baby?
Having or adopting a baby is an incredible life event, but it can bring forth some potential challenges. The first year can be really tough on new parents. Your sleep schedule will be forever altered! There is also a lot to prepare for in advance, including prepping a nursery and ongoing visits to the doctor.
I’m sure many of you soon-to-be parents are wondering. Katie and I certainly were when we found out she was pregnant last year. Our daughter Annie Rose was born February 6th, weighing in at 6 pounds.
So, “How much do all of those trips to the doctor and hospital cost?”
Well, that’s a great question and it ain't cheap. As always with personal finance, it depends.
- Where do you live?
- Are you going to a hospital or having a home-birth?
- How long was your stay?
- What if there are complications?
- What type of health insurance do you have?
From Katie's first prenatal visit up until we were back at home with Annie, our all-in out of pocket costs for the pregnancy and delivery were approximately $6,400. That hurt to just type. This doesn't include any of the additional baby related items such as a car seat, diapers (lots of diapers!), or a stroller. For health insurance, we are covered through Katie's employer in a high deductible health plan (HDHP).Fortunately Katie had awesome doctors and most everything related to the pregnancy went very smoothly. Katie saw the doctor approximately 13 times prior to delivery. She was admitted a day prior to Annie's birth for an induction, which added an extra day to our stay. She was in the hospital from Wednesday, February 5th to Saturday, February 8th. Luckily her primary doctor also delivered the baby. We were fortunate her schedule worked in our favor.
So, knowing the ballpark cost of having a baby, now what should you do? Here are a few ideas that will hopefully assist. (First, understand the healthcare benefits available to you through your employer or the marketplace).
Use an HSA*:Well what is an HSA? An HSA or Health Savings Account is similar to an IRA or 401k but it is primarily used for medical expenses. It can also be used for retirement, but that is a topic for another day. If you have a HDHP (high deductible health plan) you will generally have access to an HSA account. HSA's can be very useful because of its unique, triple tax advantage. It is one of the only accounts that offers this great feature.
Any money deposited into the account and subsequently used for medical expenses can be withdrawn tax free. The funds may be invested within the account and grow tax free as well. For a married couple in the top tax bracket, that can be a savings of nearly 40-50%! Unlike some other accounts, an HSA is NOT use it or lose it. The money can stay in the account and grow over your lifetime. Many employers will incentivize their employees in the form of matching dollars as well. *Disclaimer, if available to you; also note that if people are considering having a baby within the next year, they should weigh their options when they have open enrollment this fall.
Establish a Sinking Fund:
If you do not have access to a tax advantaged account such as an HSA, a sinking fund can help too. This is a savings account (separate from your emergency fund) that can be established as soon as you find out you are pregnant or even plan to start trying. This can be held at your primary bank, or even in an online high yield savings account. A bi-weekly deposit of $250 for the next 8 months would build up to approximately $5,000. This could cover a good chunk of the medical expenses.
Are your estate planning documents, life/health/disability insurance policies updated? Have you considered opening a college savings account or building up your emergency fund? These items are crucial now that you have a little person depending on you.
Are you expecting soon? Or do you just want to discuss the financial cost of having a baby? Whatever it may be, we would love to chat.