Baby Balance Sheet: Raising 2 Kids on $220k Joint Income in Indianapolis
Introducing our new series where we give you a peek at how real families afford kids.
In This Article
When you found out you were having your first baby, your initial thought might not have been, How am I going to afford this kid? But choosing to have children will arguably have a bigger impact on your family finances than almost any other decision you make. Still, it can be hard to comprehend just how much it costs to raise a child.
Don’t get us wrong, there’s arguably no better (or more fun) way to spend your money. And a little bit of planning can make it more manageable. Saving for a baby isn’t the same as saving up for a down payment on a new home. There’s no concrete number you’re necessarily aiming for, which can make it a little tricky to know where to even begin.
Instead of guessing, what if you could learn savings tips and tricks from parents who have gone before you? At Babylist, we’re asking parents to share their saving stories, giving you a peek at how much they earn and how much of that income is set aside for kids. The hope is it will encourage you to make your own savings plan, whether that’s stashing money for daycare before your baby arrives or setting up a 529 or 530A account to help your child get a head start funding their future.
To kick things off, we have a 37-year-old marketing consultant who has two little ones under five in daycare in Indiana. She and her husband spend 25% of their family’s monthly income on child-related expenses.
About me: I’m a marketing consultant and mom of two young kids. I run my own business from home while navigating the wonderful chaos of motherhood.
Age: 37
Age of children: 4 and 2
Where do you live? Indianapolis, Indiana
What is your family household income? $220,000
Were you worried about being able to afford a baby (or having a second baby)? Why or why not?
With Baby #1, we weren't worried about cost. We were able to use money from our health savings account (HSA) to cover my OB visits and our out-of-pocket expenses for delivery. Grandparents, baby showers, and hand-me-downs from a family friend helped reduce the cost of baby gear and supplies. I had 12 weeks of parental leave, and my husband had six, which he split up, taking three weeks at the start and three weeks after I returned to work. We were able to stay home with our son for the first 15 weeks. After that, we had been planning for a grandparent to watch him at our house, so childcare expenses weren't on our radar. Due to some health issues, we weren’t able to depend on the grandparents to help with care, so we ultimately enrolled our son in full-time daycare when he was six months old.
Our main financial concern with Baby #2 was paying for full-time daycare for two children, but we knew this was temporary (roughly three years) and tried to budget accordingly.
Did you have a savings goal before your baby arrived, or are you working toward one now?
We didn’t have a set amount; we were trying to save up before we had Baby #1. As soon as we started talking about having a baby (about a year before I got pregnant), we started setting some extra money aside each month. We also stocked up on diapers, wipes, etc., throughout pregnancy to spread out the cost. Since we thought one of the grandparents was handling child care, we didn’t save much for that expense.
While I was pregnant with Baby #2, we knew we were going to pay for two kids to be in daycare, so we were more focused on saving specifically for that. One easy way we saved was by transferring all of our reimbursements from our child care FSA for Baby #1 to a savings account to prepare for having two kids in daycare. We had about $7,900 saved up by the time the new baby arrived, which didn’t cover full tuition but definitely made a dent.
How did your experience paying for Baby #1 influence how you prepared for Baby #2?
We had much more visibility into daycare costs and were able to plan (financially and mentally) for that additional cost. We were also able to reuse most of our baby items and clothes for Baby #2 so that reduced initial expenses. And between babies, my husband got a new job, which both increased our income and extended his parental leave to 16 weeks. We were able to delay putting our second baby into daycare until he was six months old, thanks to that extended leave.
What kinds of financial tools (or tricks) are you using to help reach your savings goals?
Spreadsheets and maximizing childcare FSA.
Are you setting up any savings accounts for your baby—like a 529, custodial account or something else? If yes, what kind of account(s) are you using?
We have a 529 and custodial account for each child. We contribute $100 per month to each child’s 529 ($200 per month total) through direct deposit. And we contribute $5 a week to each child’s custodial account and then at the end of each month my husband will make an additional contribution depending on his variable comp—usually around $50 per child. So we’re contributing roughly $140 per month total to custodial accounts.
We don’t have a specific savings goal for the custodial accounts. We set them up because we want to teach our kids about investing and saving. It also allows us to use this 20-year runway to give them a head start on saving and compound interest before they are out on their own in the real world.
It will ultimately be up to them how they use the money as adults, but our hope is that they enter the workforce with a solid understanding of how to save and continue to build their retirement savings.
If you’re setting up a savings account for your baby, are you hoping friends or family might contribute to it too?
No. We’ve had a few friends and family members contribute to the 529 accounts over the years, but nothing major. Neither my husband nor I grew up in families where it was customary for grandparents or aunts and uncles to contribute to kid-related savings accounts, so it’s just not something we do.
When it comes to money, what part of having a baby (or raising a kid) feels most stressful?
Child care. Both my husband and I were raised by stay-at-home moms, and we were among the first of our friends and families to have kids. With our first, we didn’t really know how expensive daycare would be. We were better prepared for our second, but then it was also more expensive because we’re paying for two. Our oldest will start public kindergarten in the fall, and we will finally drop back only paying tuition for one child.
Are you receiving any family help for paying for baby expenses?
Our parents bought us a few essentials (crib, stroller, etc.) and have generously watched the kids for us for years, helping saving on babysitting costs
Can you share how much you spent on your baby/children in the last month?
Child care: $2,628
Groceries (for the whole family): $1,680.90
Formula: N/A
Diapers & pull-ups: $152.31
Wipes: $0. We buy in bulk and have a big stock at home right now
Aquaphor: $13.18
Clothing (rash guard for Florida vacation): $10
Shoes (four pairs): $98.77
Valentines for school parties: $7.99
Travel items (air mattress, coloring books): $72.79
529 contributions: $200
Custodial account contributions: $140
What percent of your monthly budget goes to baby expenses?
Roughly 25% (includes all of the above, excluding groceries). Increases to 38% if you include groceries for the whole family.
How much do you discuss the cost of raising a baby with your partner?
We talked about it occasionally when I was pregnant, but I don’t think we had a great handle on what children cost after they’re born. Now that we’re in the thick of it, we discuss it regularly. We walk through our budget and monthly spend at least once a month.
Any advice you’d give to new moms or families preparing for their first baby?
For us, the biggest sticker shock was the cost of child care. We were more worried about choosing the right stroller, but we had no idea how expensive daycare would be. I’d recommend expecting parents/anyone planning to have children to start looking into the cost of daycare in your area and what’s involved in getting your child enrolled as early as possible, so you can be prepared and start saving.
Navigating your money when you start having kids can be overwhelming. It’s so helpful to see how other families make it work. Want to share your story? Fill out the form here.
Babylist Money is here to help you feel confident managing your family finances, whether you want to understand how a 529 works, open a Trump Account, or start saving for Baby #2.
