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Baby shower season is upon us! Which brings us to our next millennial money blunder: kids and how much money it takes to raise them, especially at the beginning. Everyone knows that having a baby is expensive. But how expensive might surprise you. If you don’t plan for the expected, and plan even more for the unexpected, having a baby can put a real strain on your wallet and your relationships.

This is the story of the fictional millennial couple Anna and Zach, and how their financial life got turned upside down after they had their first child.

A little background:

Anna and Zach have been together for a while now, seven years to be exact. They got married in their late 20s, cruised the Caribbean on their honeymoon, and then settled into married life in Richmond. Soon after they were pregnant, and were absolutely thrilled! They threw a big party to celebrate, started decorating the nursery, and opened a separate checking account for funding those coming baby expenses. Anna and Zach took their time thinking of all the potential baby needs: diapers, childcare, toys, clothes. Daycare was going to be their biggest expense by far, as they didn’t have family nearby to help care for Lucas during the work week. They found a relatively reasonably priced daycare near Anna’s office, and hopped on the waiting list. Nine months later, baby Lucas arrived.

The first few months:

Anna and Zach were ecstatic about their new baby, and very sleep deprived. Financially they thought they had it all together. They set up an automatic deposit into the baby funds checking account each month, and had enough gifts from the shower to cover the necessities. They were sticking to their budget for the most part, and only putting a few things here and there on their credit cards when the funds ran a little short. The couple returned to work after their family leave was up, and they tried to get used to leaving Lucas in someone else’s hands at daycare.

Things started adding up:

Unfortunately, the couple became very unhappy with Lucas’s daycare situation three months in. They moved him to another, more expensive facility instead, which was all the way across town. Lucas started getting sick all the time too. From croup, to unexplained rashes, fevers and the throw-ups, it seemed like the couple was living at the pediatrician’s office. Zach and Anna had to switch off taking vacation days to care for their sick baby, and then were forced to take unpaid days off after that. As if things weren’t hard enough, Lucas spiked a very high fever late one night, and they had to rush him to the emergency room. Soon after, after a long sleepless night with a very fussy Lucas, a low balance alert popped up on Anna’s phone. She and Zach took a good hard look at their accounts, and quickly realized their baby budgeting had gone off the rails.

What went wrong:

First and foremost, they were way over budget with childcare. They had accounted for the monthly cost of the first daycare, but the one they moved Lucas to was $200 more each week. That’s $10,000 more a year, not to mention the extra gas to get him there and back. They had no idea they would rack up so many medical bills in the first year of their baby’s life either. Or that they would have to take unpaid leave to stay home with him. They were spending a little bit too much each month on impulse baby purchases too. They got behind on their credit card payments, and took turns putting in extra hours at work to make their employers happy and keep their bank accounts in the green.

Forward thinking:

Anna and Zach continued to struggle to make ends meet that whole first year. Slowly, as Lucas got older, things got easier. Childcare costs went down, he wasn’t sick nearly as often, and Anna got a promotion at work, which made their monthly cashflows more manageable. The couple made sure to keep impulse shopping at a minimum, and finally got their credit card debt under control by Lucas’s third birthday. On top of that they started some financial planning, and even opened a college savings account. In hindsight, Anna and Zach wished they had socked more funds away into that checking account before Lucas arrived. They realized putting away extra emergency funds would have made the unexpected a lot easier to handle too.


Our final topic in the Money Mishaps series is coming up…racking up debt because you could. Stay tuned!