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Friday, June 23, 2006

9 financial shocks for new parents

According to a recent study by the U.S. Department of Agriculture, it costs a middle-income family $250,000 to raise a child from birth to age 17. And that doesn't include the cost of a college education. In the first year alone, the costs of a baby can reach between $9,000 and $11,000, and most new and expectant parents don't realize the size of the financial burden they are taking on.

So where does the money go? Here are the top nine financial shocks that parents face when they add a child to their family.

1. Medical expenses: Medical care for mother and child is a potentially significant expense facing new parents. The cost of delivering a new baby can range from $5,000 to $8,000 for a vaginal delivery to more than $12,000 for a cesarean delivery. If there are complications, those costs can increase dramatically. Even if your child is in perfect health, new babies require numerous well-visit checkups and immunizations.

2. Maternity leave: Although most short-term disability insurance policies cover the time Mom is out of work due to recovery from child birth (or complications during pregnancy), the average policy only pays a portion of your gross income for a set number of weeks (usually four to eight) after birth. If your maternity leave extends beyond the stipulated time, or if Dad decides to take advantage of the Family and Medical Leave Act (FMLA), it will be at no pay unless you use vacation or sick leave.

3. Child care: If both parents work outside of the home, they need to be prepared for probably the biggest financial shock facing new parents -- the cost of child care. Depending upon where you live, child care expenses can range from $5,000 per year for family day care to more than $20,000 per year for a live-out nanny.

4. Diapers and wipes: The average baby goes through ten diapers a day. If you use disposable diapers, that?ll cost you about $2,000 by the time your little one is potty-trained! Add to that the cost of cleaning their little bottom with a wet wipe or two at each diaper change and you?ll be adding about $100 to your monthly grocery bill. Even using cloth diapers can be expensive if you use a diaper service.

5. Formula and/or breast-feeding expenses: The cost of formula shocks just about every new parent. The general rule of thumb is that a baby needs about 2.5 ounces of formula per pound of body weight per day. Breast-feeding can certainly minimize that expense, but there are some hidden costs associated with breastfed babies. For example, you may need to purchase or rent a breast pump, an essential for moms who work outside the home. Nursing bras, breast pads, nursing tops, lanolin ointment and a breast-feeding pillow are also common expenditures.

6. Baby gear: Many new parents don't realize just how much "baby gear" is required to care for and entertain an infant. Crib? Changing table? Rocker or glider? Car seat? Stroller? Baby swing? Monitor? Bouncer seat? Doorway jumper?Most of these items, with the exception of a car seat, can be purchased used. "Baby furniture, such as a changing table, gets very little wear and tear and can be purchased second-hand," advises Wilburn.

7. Clothing and shoes

8. Baby food: Once babies reach 4 to 6 months of age, they start eating baby food in addition to drinking breast milk or formula.

9. Life insurance premiums and attorney fees: Wilburn advises couples to review their life insurance policies and increase them so that each spouse has adequate funds to raise each child to age 21, should something happen to one of them.
(courtesy of MSN home)

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