Baby goes buy buy: once a child arrives, parents must turn their focus from retrofitting the bathroom, dining out and fancy vacations to budgeting for diapers, formula and day care

Insight on the News, August 5, 2002 by Alexandra Rockey Fleming

Jack Kelly shocked his parents. Actually, it wasn't Jack, now 1 year old, but the expenses surrounding his arrival that caught them off guard. Neither his mother, Linda Sinoway, nor her husband, Doug Kelly, anticipated the cash outlays involved in having children.

"Before Jack was born, we were in shock at what it cost to create a place for this baby coming into your life," says Sinoway, who lives with her family in Washington. "Then, after his arrival, having never been around babies before, we were shocked at how quickly he grew and changed and the cost associated with all that."

For many couples, the plunge into parenthood is as much an economic as an emotional consideration, endlessly debated, calculated and analyzed. The evolving priorities inherent in parenting require evolving financial decisions, including spending and saving adjustments.

Economist Mark Lino and his colleagues at the Agriculture Department have crunched the costs of raising a child in the United States. Their estimate for the "middle-income group," taken from the Expenditures on Children by Families 2001 Report, is $9,030 for one year for housing, food, transportation, clothing, health care, child care and miscellaneous expenses.

The Agriculture Department breaks down the total this way: 37 percent for shelter and furniture, such as baby cribs; 12 percent for food; 13 percent for transportation, including car seats; 5 percent for clothing, including diapers; 7 percent for health care; 15 percent for child care; and 11 percent for miscellaneous expenses.

Although family financiers say there is no distinct "right" time to start a family, they agree that couples can do themselves a favor by setting financial goals and spending wisely. "If you're waiting for a magic signal that it's a perfect time to have a baby, there's no perfect time," says Ann Douglas, author of Family Finance and other parenting books, and the mother of four. "A lot of dads think they're terribly irresponsible unless they've saved for college already, and people think that if they're going to be `good' parents, they have to buy the best of everything. That's just not true--you can spend as much or as little on your family as necessary. Another thing: Sometimes people think your life won't change that dramatically--it will be kind of like your old life but with a cute little baby. As we know, it changes everything."

Robert Weagley, chairman of the Department of Consumer and Family Economics at the University of Missouri in Columbia, takes another tack. "Couples are ready when they are managing their finances in such a way as to support the goals that they have deemed to be most important," he says. That includes standard financial management, such as emergency funds, adequate insurances in place and a retirement-savings plan. "I call it the sort of mental and goal-setting plan to your life, rather than a cow-path method of following the cow in front of you," says Weagley, who doubles as a financial planner and investment adviser.

Jack was in the plan for Sinoway and Kelly. The couple were home owners, established in their careers, and purveyors of savings plans and retirement and life-insurance policies. They had an eye on a budget. "We were both in our mid-30s and knew that we wanted to start a family and that we shouldn't put it off much longer," Sinoway says. "We had all our ducks in a row."

The initial outlay included buying a crib and a glider, she recalls. "Someone loaned us a changing table, and people were very generous, throwing us several baby showers. We received a good portion of the things we needed as gifts, but we still had to go back and spend hundreds of dollars getting the rest of the stuff. We did splurge on a high-end car seat for Jack, based on safety ratings, but as far as the initial costs, it really was the little things that added up for us: items from crib and bassinet sheets to safety equipment, to sleepers and clothes, to age-appropriate toys and books for Jack."

Soon, the basics became a big deal. "One thing I think that has been incredibly shocking was when I had to introduce formula and jars of baby food," Sinoway says. "That was mind-bogglingly expensive. We'd go to Costco and buy it in bulk. I'd buy three large things of formula, costing $75, and that would last five weeks or so. And I'd go to Safeway with my coupons and come out with 30 jars of food, but then I'd run back to the store in five days after all those breakfasts, lunches and dinners."

Then there are the baby toys, clothing and other items that compel Alan Fields, coauthor of Baby Bargains, to use the words "grandma bait"--the industry term for products that specifically are designed to entice grandparents. In general, people are spending more on children than ever before, Fields says. "The juvenile-products industry has tripled its size in terms of dollars. It's a $6 billion-a-year business. You can see that when you walk into a baby store."

Fields says the last 10 years in the industry have seen an influx of foreign-made products. Strollers imported from New Zealand cost $300 to $400, while a Graco stroller made in Mexico still goes for about $50. An imported wrought-iron canopy crib sells for $1,300, compared with inexpensive domestic crib at about $100.