Budget Tips for Welcoming a Second Baby

First-time parents are all too familiar with the cost of planning for a baby. But if you’re preparing for baby No. 2, twice the kids doesn’t necessarily mean twice the costs. In fact, the U.S. Department of Agriculture estimates that the cost of raising a child can be as much as 25 percent less in families with multiple children.

That doesn’t surprise Atlanta dad David Bakke, a financial columnist for MoneyCrashers.com. “You have to do some budget trimming when you have a second child,” he says. “But the cost of a second child is probably not as bad as you would think, especially with all of the items that can potentially be reused.”

In fact, there are plenty of savings opportunities if you’re preparing for baby No. 2 — provided you do a little planning in advance. To help you get started, here are some tips to keep eight key costs in check:

1. Housing Costs When Welcoming a Second Baby

Someday, your kids might want their own rooms. While they’re young, though, you may be able to make do with the space you have. “If both children aren’t old enough to need their own rooms, one bedroom can suffice in the short term,” Bakke says.

2. Car Costs When Welcoming a Second Baby

Having a bigger family doesn’t necessarily mean you need a bigger car. Save money by keeping the wheels you have, at least for now. “Most cars are big enough to handle the room needed for two parents and two children,” Bakke says.

3. Child Care Costs When Welcoming a Second Baby

Two-parent households may need to weigh the costs and benefits of child care versus those of having a stay-at-home parent. “Your child care costs might not actually double, as some child care providers may give you a discount when caring for multiple children,” Bakke says. “Your best bet is to check with different providers. The average cost of full-time child care for a 4-year-old, for instance, is about $376 to $1,027 per month. Assuming a 10 percent discount for a second child, that comes to roughly $714 to $1,951 per month. Weigh that against the salary and expenses of the parent who would be staying at home.”

4. Crib, Stroller, and Car Seat for a Second Baby

Starting a family is expensive because you have to buy everything you don’t have. Growing a family is less expensive because you likely have many of the things you need, such as toys, cribs, strollers, and car seats. “Just check these items for any damage or product recalls to ensure they’re still safe,” Bakke says.

5. Food and Clothing for a Second Baby

“You will definitely need to budget for higher food expenses with another mouth to feed,” Bakke says. But that extra mouth may make it more practical to buy in bulk in order to save. “If your second child is the opposite sex of your first, you’ll need to factor in additional money for clothing. Otherwise you can use many hand-me-downs.”

6. Insurance Costs When Welcoming a Second Baby

Planning for another child could require you to update your insurance policies and increase your coverage. “You might want to consider additional life insurance,” Bakke says. “Your health insurance premiums may also increase depending upon your policy.” But you might be able to save money by bundling policies under a single carrier.

7. Taxes Related to Welcoming a Second Baby

Tax advantages can help offset some of your extra expenses. The tax exemption for each qualifying child in 2014 is $3,950. “Most couples can also claim an additional $1,000 tax credit for the second child,” Bakke says. “Plus, you might be able to claim a larger credit for child care expenses if those go up.”

8. Savings for a Second Baby

A second child makes saving for college and emergencies doubly important. Of course, stashing more away now will make paying for things easier later, but it’s OK to stay realistic. “In a perfect world, you would want to double your college savings contributions,” Bakke says. “If that’s not doable, just boost your contributions as much as you can. You may also want to increase your emergency fund, since the likelihood of unexpected medical expenses will go up.”

If you have a 529 plan to help save money for college, you aren’t required to enroll in another one for your second child. If your plan comes with annual or quarterly maintenance fees, sticking to a single account could save money.

Spend time considering the expenses and savings that come with the addition of a family member so that you can be prepared for any financial adjustments that need to be made.

Use our money saving tips to keep costs in check.


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