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The Cheapest and Most Expensive States and Metros to Have a Baby

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Everyone knows that having a baby is incredibly expensive, from delivery or adoption costs to outfitting a household with strollers, bottles, cribs and layettes. But even if friends and family come together to provide everything needed on day one, there are ongoing costs of raising a child. So how much should a typical couple expect to budget each month?To find out, we looked at some average costs (and one tax credit), both by state and for the 100 largest metros in the U.S.:

  • The difference in rent between a typical one-bedroom and two-bedroom apartment
  • Average cost of a day care center
  • Average cost of baby apparel, diapers and wipes
  • Average additional food costs
  • Average cost of adding a dependent to workplace insurance
  • Federal tax credit

These are just the basic costs. Parents who prioritize higher-end goods, parent-and-me classes, baby sitters and other little luxuries to help with parental stresses can expect to spend more.

Hover over a state to review its costs and tax credit.

Key takeaways

  • The average monthly cost of raising a baby across all 50 states is $1,037.
  • San Jose, Calif., is the most expensive metro to raise a baby, with an average base cost of $1,705 a month. Little Rock, Ark., is the cheapest of the 100 largest metros, with an average base cost of $707 a month.
  • Massachusetts is the most expensive state for raising a baby, at an average cost of $1,521 a month. Arkansas is the cheapest state, with an average monthly cost of $723.
  • Day care costs are far and away the largest monthly expense, representing 72% of monthly costs, on average. The proportion is highest in New York state at 85% and lowest in Alaska at 59%.
  • New parents in 22 out of the 50 states, as well as the District of Columbia, can expect their monthly costs to go up by at least $1,000 — just for the basics.
  • Parents in 63 of the 100 largest metros can expect to increase their monthly costs by at least $1,000.

People in the 10 most expensive states (and District of Columbia) to raise a baby can expect their monthly budgets to balloon by over $1,200 a month.

Living in a large metro can mean having to set aside more money each month for a new baby. Residents in the 10 most expensive metros can expect their bills to increase by between $1,368 and $1,705 a month.

Here is a breakdown of average baby costs in every state. The difference in cost between the most expensive and least expensive state is almost $800 a month.

How baby budgets compare in the 100 largest metros

Why parents struggle with the cost of a baby

A lot of new families incur significant debt when having a baby. Those who get pregnant may face hefty maternal and prenatal medical bills and those who adopt may see high legal and travel bills. Parents may also rack up credit card charges, such as to get a car seat, bassinet or maternity clothes.

Many families don’t have access to paid parental leave, so they are forced to forgo several weeks of at least part of their income. All this can put new parents into debt even before their monthly expenses increase, and those families can add monthly debt payments (including interest) to the very basic monthly cost increases we describe here.

That — combined with any other pre-existing debt, such as car payments or credit card bills ripe for consolidation — can create daunting challenges to people who are expecting or planning for a first child. In a perfect world, everyone would be on secure financial footing before having a baby, but that’s not always realistic, and most American parents find managing the additional monthly expenses to be challenging.

How to reduce these costs of having a baby

Here are some of the ways that parents can trim costs in each of the categories we surveyed.

Difference in rent between a 1- and 2-bedroom apartment

Couples can get away with living in a one-bedroom apartment for a while with a small infant (it’s recommended that infants stay in the same room with their parents for at least six months). Most parents prefer a separate nursery, but it will be a while before the baby cares.

Average cost of a day care center

For two-income and single-parent households, child care is essential and expensive. While some couples may decide that one parent should leave the workforce to stay home with the child so they don’t feel like they’re working just to pay for day care, it’s important to remember that stay-at-home parents can suffer long-term and compounding economic consequences by leaving the workforce for a period, including loss of career and wage advancement, Social Security contributions and retirement fund contributions. (Of course, there are other reasons why a parent may decide to stay home with a child.) Other parents can negotiate child care with family and neighbors. There are also federal, state and (sometimes) local child care subsidies based on income.

Average cost of baby apparel, diapers and wipes

After the initial purchase of clothes for an expected baby, most Americans don’t spend much on infant apparel, but they do spend some. But diapers and wipes are unavoidable. Couples who have access to a washing machine may opt for a larger initial outlay to invest in cloth diapering, although it’s growing in popularity and people donate, trade or sell discounted used cloth diapers when their kids are potty trained. Similarly, used children’s clothing is easy to come by, and because babies grow so quickly, they’re usually barely worn or brand new.

Average additional food costs

Although babies don’t eat a significant amount of solid food for at least six months, some families use formula either by choice or necessity. Breastfeeding mothers often require significantly more calories, often complain of being constantly hungry and may be more conscious about the quality of food they ingest. Organizing meal plans around nutritious and inexpensive foods and coupon clipping may be the only way to save money on adult food, but it may be especially challenging for sleep-deprived parents. Money can be saved on avoiding prepackaged baby food by steaming and pureeing or mashing regular table food.

Average cost of adding a dependent to workplace insurance

Not every family has workplace insurance, and many who don’t will qualify for government insurance programs for their children, such as Medicaid. (It’s estimated that Medicaid covers nearly half of all births.) But even families that don’t qualify for state-sponsored insurance will feel the hit of adding a dependent to their employer-subsidized plans. One bright spot is that under the Affordable Care Act, there aren’t any copays for the frequent well-baby checks.

Federal tax credit

For 2018, parents will receive a $2,000 credit, which means that amount will be taken off the top of their tax bill. A portion of that will be refundable, so that even if a family owes less than $2,000 in federal taxes, they’ll get some money back. That’s not the only tax break available to parents, but it’s the only one that has a dollar amount that applies to every American.

Deductions — which is an amount of income on which people don’t have to pay any tax — are available for parents at both the federal and state level (although a few states don’t have income tax).

Pretax deductions can also be taken from paychecks through a dependent care flexible spending account for up to $5,000 for child care costs, and health insurance costs are also taken from paychecks pretax. And $2,650 can similarly be deducted from paychecks pretax for health care expenses. Families in 2019 can deduct health care costs from their taxes if they exceed 10% of their adjusted income (up from 7.5% in 2018).

That’s a high hurdle for most, and some married couples decide to file separately so that medical bills meet the threshold of one income versus their combined incomes. In general, parents should expect a significantly lower tax bill after the arrival of a child.

Methodology

Researchers used the following data to estimate the basic budget changes a family would experience with the arrival of a first child, both at the state level and for the 100 largest metropolitan statistical areas in the U.S.

  • Rent: The difference in cost between an average one-bedroom and an average two-bedroom from the U.S. Census Bureau’s American Community Survey.
  • Child care: The average cost of in-center child care, as reported by Care.com. In instances where an average was not available for a particular metro, the state average was used.
  • Baby apparel, diapers and wipes: The former was taken from the Bureau of Labor Statistics’ Consumer Expenditure Survey regional tables, and the latter two were reported by Walmart.
  • Additional food costs: This was calculated from the Bureau of Labor Statistics’ Consumer Expenditure Survey by indexing the average total food costs reported in the regional table and applying that multiple to the difference between married couples with no children and married couples with children younger than 6 from the household units table.
  • Insurance: The difference in cost between the statewide average employer-subsidized plan for an employee and the employee plus another person plan from the U.S. Department of Health and Human Services’ Medical Expenditure Panel Survey.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kali McFadden
Kali McFadden |

Kali McFadden is a writer at MagnifyMoney. You can email Kali at [email protected]

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Survey: Americans Fear the Stock Market More Than They Love Retirement

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Gains and losses in the stock market can provoke a wide range of emotional responses, from jumping for joy to falling into a fetal position. But a recent MagnifyMoney survey found 60% of Americans feel anxiety when they think about investing in the market, and that reluctance to embrace investing may be costing them when it comes to retirement savings. Let’s take a look at why Americans dread the stock market and how they can face up to their fears.

Survey says people fear stock market crashes

The biggest reason Americans don’t like the stock market is because they are afraid they’ll lose their money in a market downturn or a crash. Our survey found that almost 61% of Americans hesitate to invest in the stock market because of a potential crash. Not every demographic feels that anxiety equally: Almost 72% of millennials worry about a crash, compared with only 56% of Gen Xers and 55% of baby boomers, despite the fact that the younger millennials have more time to absorb and make up for losses in the market.

Beyond age, gender also plays a role in shaping a person’s investing strategies. Our survey found that 59% of men were willing to accept the risk of losing money in the market if it gave them the possibility of a big windfall, while 58% of women didn’t think the loss of any money was worth investing in the market. Women also worry more about making a mistake with their investment decisions — 63% of women versus 53% of men — and are less likely to have an investment account — 44% of women have accounts versus 60% of men.

According to our survey at MagnifyMoney, more than half of the respondents have an investment account, and most of them (67%) have one thanks to their employer.

Why you need to invest in the stock market

Movies such as The Wolf of Wall Street and The Big Short may give the impression that the stock market is the exclusive playground of the privileged looking to turn their millions into billions. But the modern retirement savings landscape — specifically the shift from companies offering pension plans with guaranteed lifelong income, to employer matches on private investment accounts — makes investing in the stock market a necessity for anyone hoping to retire one day.

“Unless you are a Kardashian or the founder of a tech startup, very few people will be able to save enough money to have a secure financial future without at least some exposure to investments,” said David Rae, a CFP based in Los Angeles.

It’s not a coincidence that Americans who don’t invest in the stock market also lag woefully behind on their retirement savings. Less than half of the country’s women have an investment account, and only 36% of them report feeling on-track with their retirement savings, according to a 2018 study by Prudential. And that sense of falling behind isn’t just a feeling — a separate survey from Student Loan Hero, which like MagnifyMoney, is also owned by LendingTree, found women have saved on average only half as much as men.

Millennials who shun the stock market risk seeing their retirement dreams slip away. A report from the nonprofit National Institute on Retirement Security found that millennials as a whole have “earned about 20% less in wages, are less likely to own a home, and have accumulated about half of the wealth of their parents at the same stage in their lives.” A separate study from MagnifyMoney shows just how far this generation has to go, reporting a median savings of $23,000, instead of the $112,000 many financial experts would recommend.

In short, unless you have a trust fund or a billion-dollar idea, you can’t really afford to ignore the benefits of compound interest granted by investing and just store all of their money away in a deposit account, where inflation will almost certainly eat away most of its purchasing power over time.

How to get over the fear of investing

The thought of investing may cause a sinking feeling in most people’s stomachs, but the following advice should calm your nerves when it comes to putting money to work in the stock market.

Don’t panic when the market does

If your worst fears about the stock market are realized in the form of a recession or crash, one surefire way to make things worse is to dump all your stocks and leave the market. “Sticking to your portfolio, whether times are good or bad, is usually the right choice,” said Rae. “Buying and selling without a plan is a recipe for crappy investment returns.” Fortunately, the MagnifyMoney survey found that almost half (49%) of respondents plan to do nothing if a recession hits.

While it’s good so many people aren’t planning to ghost during a bear market, you could also start thinking of a recession as a chance to snag stocks on the cheap. “A recession is like a big sale on stocks that only comes along every few years,” said Rae. “Look to increase your contributions to your investment accounts, if you can.”

Act your age with your investments

Not only are the young blessed with wrinkle-free skin and all of their hair, but they also have the ability to maximize the return on their investments thanks to the magic of compound interest. Because time is on their side, they can afford to allocate more of their savings in stocks — where risks and rewards are both greater — than in lower-risk, lower-return bond markets, money market accounts, savings accounts or other deposit accounts.

As you get older and wiser, and closer to the big retirement date, you should rethink the makeup of your portfolio, shifting more investments to safer asset classes and away from riskier stocks. This way if the market suffers a downturn, you’re be less exposed to the damage and better able to weather the storm until good times are here again.

Don’t be afraid to ask for help

You may think you need to be rich before you need to hire a financial advisor, but there’s nothing further from the truth. Advisors aren’t free, and even the low-fee ones will charge a commission that ultimately comes from your savings, but the peace of mind and clarity you gain about your investments can be worth the money. One rule of thumb you might consider is to use a robo-advisor if you have less than $100,000 in investable assets, and pony up for a real live human advisor once your investments break six figures.

The time to invest in the market is now

Most Americans don’t like the stock market, but investing is almost a requirement if you want to retire. Fortunately, investing doesn’t have to be so scary and by taking some time to learn the basics, you’ll be well on your way toward celebrating your golden years in financial security.

Methodology

MagnifyMoney by LendingTree commissioned Qualtrics to conduct an online survey of 1,049 Americans, with the sample base proportioned to represent the general population. The survey was fielded May 13-15, 2019. Generations are defined as follows:

  • Millennials are ages 22-37
  • Generation Xers are ages 38-53
  • Baby Boomers are ages 54-72

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

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