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Ten tips

By LAURA T. COFFEY
© St. Petersburg Times
published January 27, 2002

Brace yourself for your new baby's impact on your budget

According to one estimate, many parents spend $300,000 on their child by the time he or she turns 18. Sound overwhelming? These tips can help you prepare financially for the arrival of your bundle of joy.

* * *

1. Reassess your health coverage. Consider switching to a health maintenance organization or preferred provider organization that covers all well-baby care. Add your baby to the plan within 30 days of his or her birth.

2. Delay smaller purchases. Your baby's arrival is bound to bring gifts of clothing, blankets, toys and other items. To avoid having to return duplicates, register your baby for gifts or wait to make such purchases.

3. Plan ahead for big buys. Spread out major purchases, such as a crib, car seat, stroller and changing table, throughout your pregnancy. This will help you avoid a major outlay in the ninth month.

4. Start buying in bulk. Join a warehouse club such as Costco or Sam's Club that sells large quantities of diapers, formula and baby wipes. You also can find deals on kids' clothing, strollers and other items there.

5. Discuss day care options. Would it be cost effective if you or your spouse stayed home? Could you team with a friend or relative and split the cost of a full-time nanny? Does traditional day care make the most sense? The Florida Children's Forum at (888) FL-CHILD (888-352-4453) can send you a directory of licensed day care providers for your county.

6. Take your time. Some first-time parents-to-be feel enormous pressure to buy a larger vehicle or a bigger home in a good school district. Bear in mind that your infant won't be needing much space for a few years.

7. Consider additional life and disability insurance. Parents with young children should have enough life insurance to cover five to 10 times their annual salaries and enough disability coverage to replace at least 60 percent of their income.

8. Set up a college savings fund. Invest in a stock-index fund that matches the market's performance, has low fees and generates higher returns over time than savings bonds. Ask friends and relatives to donate to it.

9. Investigate tax credits. The child tax credit, which is subtracted directly from parents' tax bills, is $600 per child through 2004. Working parents also may qualify for the child care tax credit, which allows them to deduct as much as 35 percent of their annual day care expenses.

10. Ask about flexible spending. Check with your employer to see whether you can direct a portion of your pretax wages to a personal account from which you can draw for medical and child care costs.

-- Compiled by Laura T. Coffey. Sources: Consumer Reports; Florida Children's Forum.

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