Budgeting for a Child

(Thank you to Lisa Belkin, author of "The Motherlode" blog in the NY Times, for permission to use this post. Although the question posed is about raising a child in NYC, its wisdom is useful for people living anywhere.)

After the government last month released its annual tally of what it costs to raise a child to age 18 ($222,360), I received an e-mail message from a reader, A., who is looking for advice on how to find a more practical number. That lump sum is interesting as a conversation starter, she says, but it isn’t much help in trying to budget for an actual child.

She writes:

I’m a single woman trying to figure out what it will cost for me to bring up a child living in New York City (hopefully in 2011).

Many of the Web sites I’ve looked at seem conservative for Manhattan or just unrealistically low. Since I’m asking for some help from family members, I want to be realistic and fair in my breakdown.

I work in health care and know this will be critical to my planning my financial future along with my child’s future.

I’d very much appreciate your guidance and any reliable resources, so I can put together the projected costs of day care for the early years etc., clothes, diapers, special kids furniture and supplies, elementary-school expenses and so on.

As you can imagine, this will enable me to move toward my dream of starting a family.
Thank you. A.

I sent A.’s question to Jean Chatzky, the financial editor of the Today show, and the author of a number of books on personal finance (her latest, “Not Your Parents’ Money Book,” teaches finance to kids and will be out later this summer.)
Here’s her advice to A.:

My mother has often said to me, “If your father and I had waited until we could afford to have kids, you would never have been born.”

I think there’s something to that. Kids are expensive, generally more expensive than we think they will be. But I also think that the idea that there’s a universal answer to that question – much like how much does it cost to retire or how much does it cost to plan a wedding – even a universal answer city by city is one of the fallacies of modern life. The number, the amount you choose to spend, depends on how you choose to raise your child.

In Manhattan, for instance, will you choose public school or private school? Will you choose day care or a nanny? Will you choose taxis or buses and subways? Will you choose the park for an afternoon activity or a Broadway matinee?

There is no one number. But for general guidelines, I like the calculator at Babycenter.com. It puts your total number at $340,930, including public college; the cost of Year 1 is $16,097. To get there, I told the calculator that your child would be born in 2011, that you would live in a city or suburb in the Northeast, that you had an annual income of between $38,000 and $64,000, that you were a single parent and that you would choose a public college. If I was wrong, you can fiddle with the inputs, and the number goes up or down.

But what I like is that it seems to assume people will live as they often do – that a new baby doesn’t necessarily mean a move to a new apartment. Plenty of people share one-bedroom places with a child, at least for the first few years. A new baby doesn’t necessarily mean a new or different car – but rather the addition of a safe car seat. A new baby, particularly if you’re nursing, doesn’t even mean a higher grocery bill. You will spend money on diapers, yes, but you’ll have so little time to get to the movies or get a manicure, you’ll be surprised how you make it up. Really you’re talking about child care and a family, rather than, single health plan. In the later years, when the price of activities ratchet up, so does the cost of children. But by then, hopefully so has your salary. And by then, certainly, you’re so invested in your children that you cut back on things you want so that they can have those they need.

Think about what my mother said. Get yourself on a budget that has you living within your means and saving at least 5 to 10 percent of what you’re bringing in, and take the leap. Good luck.