So you're about to start a family
or you've already started one.
Having a child is a beautiful, transcendent experience
but you're also gonna find yourself asking,
"How much is this going to cost me?"
I like him holding up this notebook.
This episode is personal to me.
Bobby here was born last year
and I often look at him
and I wonder what the future holds,
not just for him
but for me and my wallet.
What does daycare cost?
What do diapers cost?
Does he need a college fund?
It's pretty daunting to add all that stuff up
but Cristina Livadary has actually crunched the numbers.
Cristina, thank you so much for being on "Good Money".
I just had a baby, he's nine months old,
so we're kind of going through this.
There's figures out there that most people get
about what having a kid costs.
And you kind of delved into that
and saw that, saw what the truth was, I suppose.
It really does vary
and depend upon a number of factors.
So a great cost that can vary a lot
is the cost of maternity healthcare.
On average, Americans can expect to spend
if they're covered by a health plan, $4,500
for routine maternity healthcare.
That doesn't include, you know,
if you have an emergency C-section
or if you have a longer than expected stay in the NICU.
So $4,500 is really just the base starting point.
The next thing we wanted to investigate was
what we call "getting ready for baby" costs.
How much are we going to spend
on getting that nursery ready?
Most of our clients spend about $5,000
for some of those bigger items
that don't get bought during the baby shower.
So that could be your crib, your bassinet, your stroller.
It's worth mentioning,
the Baby Care Products market is projected to be worth
over $100 billion worldwide by 2025.
You could do parental or birthing classes
so that's like $650.
That's, like, on average for one of those classes
but there's also doulas and lactation consultants.
On average is about $2,500 for either
that lactation consultant and/or doula.
So then the final part, the most you'll spend on your child,
is childcare.
The cost of childcare is enormous.
Very early on, if you decide
and you have the means to do a night nurse,
that night nurse in LA can range anywhere
from $30 to $40 an hour.
And then you have just basic childcare
so whether it's infant daycare, a nanny
and especially popular here in Los Angeles
is having an au pair
and so an au pair will cost you $20,000 a year.
But the other thing is that
they'll also have to live with you.
So if you add all those up,
it comes to a grand total of $47,000.
Ooh, yeah.
Gosh.
That's the cost of having a baby right now
but what about the future?
Are they going to go to college? Trade school?
When are they going to move out of the house? Ever?
Roger Ma's a Certified Financial Planner
and he's been thinking about this stuff a lot
especially since he has a baby of his own named, Owen.
Both of them joined us to talk.
Let me just start by saying, I haven't done anything
to prepare for Bobby's financial future.
I'm starting at zero.
What can I do today to make that a rosier picture?
It's always good to get a sense
of where you're starting from.
So I think
coming up with your financial report card
which includes calculating your net worth,
figuring out what your living expenses are,
how much you spend on a monthly basis.
Yeah, Owen.
And in what categories
and then also what your credit score is as well
and I think that's a great starting point.
Is saving for college as big of a deal now,
as it used to be?
The cost of education has been increasing
substantially year after year
but honestly, I don't think we really know
what the, what form higher education
is gonna take in 15, 20 years.
And if it's gonna be as important in terms
of employers using it for signaling
so I certainly recommend to save within a 529 plan.
A 529 plan is a tax advantage savings account
designed to be used for a beneficiary's education expenses,
like Bobby's.
Let's say I do a 529 plan
and he grows up
and he's like, "I don't want to go to college."
What happens to that money?
Yeah, so usually if you are taking it out
for non-eligible expenses,
you might get taxed at your federal tax rate,
state tax, it might be subject to local tax too
and then you might pay a penalty as well.
That said, I think it's also important to save within,
say a Roth IRA or a taxable brokerage account.
Money in those accounts is a little more flexible
than money in a 529 plan.
Are education expenses...
What does that include?
So I believe it includes room, board, tuition,
certain electronic expenses, like computer
and some other technology. Uh-huh.
There's some flexibility to change beneficiary
on the account so certainly you might intend to use it
for Bobby's educational expenses
but let's say he goes to college,
you still have money left
and you want to take an a class for yourself
and it's at an eligible institution.
You could change the beneficiary to yourself.
I think the other two things,
that would be helpful to get into place are
a term life insurance policy
outside of your employer coverage
and then making sure that you have an estate plan in place.
And if you already have one in place,
updating it to incorporate your little one
and particularly, not only,
figuring out where your stuff goes
but in the case where you're not around
and your partner isn't around,
who is going to take care of Bobby?
So start a 529 plan,
get a term life insurance policy outside of my employer
and change my estate plan or will to include Bobby.
All right, so I'm starting to feel better
now that I know the cost,
it's probably going to be in the tens
of thousands of dollars.
This is information that I wish I'd had a while ago
and that I hope that he has someday as well.
Unfortunately, he's probably not going to learn this
in our traditional school system.
The best example's gonna be learning from you.
How does one teach kids
to have a good relationship with money?
Even if you don't feel like
you have a great relationship with money,
you have a good understanding of your own money situation.
Sharing your money ideas
and any experiences with money.
Money is in every facet of our life,
going to the grocery store, driving our cars,
living in our houses.
So being open and honest with our children,
when you're making a grocery list
and going and looking at the ads
to see what's on sale this week.
When you're talking about doing chores in the house,
if you're going to give an allowance.
And why we would be doing that for our children,
like, "Why we're giving you the allowance."
And just leading by example
and not being afraid of your own insecurities around money
because those are going to transpose onto your children.
What would you suggest is like a proper amount
to divulge about, you know,
income,
comfort?
Just being more open,
even if it's like possibly negative things.
Telling your kids, "We don't have enough money for that."
Or, "Remember we want to go
and take this vacation next month
so this month we're not going to go out to dinner
or we're not going to go to Chuck E. Cheese
or to the movies,
we're gonna try to save our money
because we want to have money for next,
our next trip or next month."
And just explaining that process to children,
what's actually going on in your head,
I think is very helpful
because a lot of times they don't see it.
They don't understand how the money even comes in,
why daddy goes to work,
why mommy goes to work,
that putting gas in the car costs money,
sometimes they don't even see those transactions.
So allowing them to see those transactions
is always very helpful.
So we talked about expenses, planning
and teaching your kids about money.
Now, I hope that the school system starts
to make financial education a little bit more commonplace
but until then,
we're going to have to just do it ourselves.