Planning to have a baby in 2018? Count the costs

The following column from  Jennifer Pagliara , CapWealth Senior Vice President and Financial Advisor, appeared in  The Tennessean  on Dec. 8, 2017.

As we enter the holiday season, millennials’ Facebook and Instagram feeds are no doubt going to fill up with engagement announcements – it’s that time of the year. But for those who have already tied the knot, is a baby announcement on the horizon? Is 2018 going to be the year of “the baby” for you?

Current stats

In 2016, 3,941,109 babies were born in the U.S. This equates to 62 births per 1,000 women aged 15 to 44, or a decrease of 1 percent from 2015. That’s a small decrease, of course, but a decrease nonetheless.

It has been noted that millennials are delaying many of the big life milestones – getting married, buying a home, starting a family – so could this possibly have something to do with the decline? And, does this mean that as our generation ages into our late 20s and early 30s, there may be an uptick in births?

Will U.S. fertility rates rebound?

There are people on both sides of the fence on this debate. The optimists believe there will be a surge of babies born due to the “tempo effect.” Essentially, demographers claim that fertility declines are followed by rebounds. The U.S. experienced this with the baby boomer generation. The war caused fertility rates to drop and then there was a huge surge of births after. The great recession could have caused a similar affect.

Naysayers, on the other hand, believe that millennials just don’t want large families anymore. Declines in unintended pregnancies is also a contributory factor of lower fertility rates.

But it’s true that millennials are more conscious of the costs of those aforementioned life events and are choosing temporary alternatives to many of those commitments – Uber over car buying and renting over homeownership – so maybe they’ve gotten wind of the costs associated with raising a family.

Babies: They’re cute, they’re cuddly, they’re costly 

While I don’t want to cause any more anxiety about having a baby (especially for first-time parents), I want to arm my fellow cohorts with knowledge to help prepare financially for what occurs once a couple becomes a family of three (or more).

The Department of Agriculture estimated that a child born in 2015 cost a middle-income, married couple $233,610 in food, shelter and other necessities through age 17. This number does not include the medical costs associated with having the baby, however, which can range from $18,239 for a vaginal birth and $27,866 for a cesarean birth without complications for parents with insurance, according to a study by Truven Health Analytics.

Additionally, the $233,610 doesn’t include the costs of college, which continues to rise each year according to the College Board, a not-for-profit organization that publishes the annual “Trends in Higher Education” reports. The organization’s “Trends in College Pricing 2017” noted that the average published tuition and fee price for full-time in-state students at public four-year colleges and universities is $9,970 for the 2017-18 academic year. And, with an average increase of about 3 percent reported by colleges each year, think about how much that will cost 18 years from now!

Now, I admit, I am skipping ahead here, I went from discussing a baby to sending them off to college with a pocket of dreams and cash! I can dial it back and say to you, that if you want to start planning for a baby, you’re going to need to know what the best type of equipment is right for them, from car seats to cribs, you need to know how much you’re spending and what for. Luckily for you, there are sites such as Mommyhood 101 who can give you reviews from all different types of products, tried and tested by parents. So, let’s start there shall we?

Advantage: Time is on your side

The good news is while the initial cost of giving birth is due right off the bat, you have the next 17 years to plan accordingly to both raise your baby and get him or her through college!

Setting a realistic budget will allow you to outline what you need to support your desired family lifestyle and identify where you can start saving for college and other future life costs, such as retirement. Time is on your side, especially when you put this practice into place before you even have children.

Jennifer Pagliara is a financial adviser with CapWealth, LLC, and a proud member of the Millennial Generation. Her column speaks to her peers and anyone else that wants to get ahead financially.