You find yourself walking resolutely across the department store, an enormous stuffed bear tucked under your arm. You set it on the counter and straighten the polka-dotted ribbon that is tied around its neck. It will cost more than your favorite pair of running shoes, but you know you must have it. That is, the baby must have it. Your eyes widen a bit when the clerk announces the total, but you quickly hand over your credit card. The bear will look just perfect when it’s propped up in the corner of the nursery. (Its yellow polka dot tie is almost an exact match to the new crib bumpers.) You predict that once the baby’s room is done, the spending is certain to slow down.

“I mean,” you think to yourself, “how much could such a little person cost?”

You might be surprised to know that the U.S. Department of Agriculture can answer that question for you. Since 1969, it has published a report called “The Annual Expenditures on Children by Families.” The report estimates the cost of raising a child from birth to age 17. Year after year, this report reveals that a little person can cost a whole lot of money indeed.

The most recent “Annual Expenditures on Children” report was published in April 2007. It states that the total cost of raising a child from birth to 17 years old is between $200,000 and $300,000 – depending on a family’s income and where they live.

Big numbers like those are overwhelming, but new parents can look at a smaller picture and reflect on the annual expenses of raising a child in order to plan wisely. Again, the USDA report comes in handy. It states that families with pre-tax incomes of less than $44,500 spend about $7,580 annually on their 0-2 year old children. Households earning $44,500-74,900 spend $10,600 on children this age and those who make more than $74,900 spend $15,760 a year on these young children. Across income groups, expenditures increase as children grow older.

After weeks of broken sleep, your first instinct might be to say you’re too tired to think about how your new baby might affect your finances. You just want him to sleep through the night; you can’t begin to think about how you might pay for his violin lessons someday. But, given numbers like those in the USDA report, all new parents should stop, make a strong cup of coffee, and give their financial future a long, steady look.

A NEW BUDGET FOR A NEW FAMILY CONFIGURATION

If you haven’t used a budget to manage your family’s finances in the past, this is a good time to start. New parents are often surprised at how the arrival of their baby affects spending in all areas of their lives.

Expenses that you might consider “fixed” increase with each new family member. Utility bills rise as soon as baby comes home. Couples use more water and often maintain warmer homes in the winter and cooler temperatures in the summer to keep their young children comfortable. Parents spend more money on gas than before having children – either because of a larger, safer car – or because of new trips to daycare and other child-related destinations. Health care costs rise with more frequent co-pays for medication and doctor visits. Not all insurance covers required immunizations either. Even entertainment spending grows when, on top of the cost of a night out, you must pay a babysitter.

Not only do existing expenses grow but significant, new ones are added. Two new and large everyday baby expenses are, of course, diapers and formula.

New parents can expect to spend up to $2500 on diapers between birth and the time a child is potty-trained. Although older babies require far fewer diaper changes than a newborn, most toddlers go through a long, transitional time before being fully potty-trained. During this time they wear expensive, “pull on,” training diapers.

Using cloth diapers with a diaper service costs approximately the same amount as disposable diapers. Parents who choose this option do so, primarily, to lessen the environmental impact of their baby. The cheapest solution to diapering is to wash your own cloth diapers. This can save more than $1,000 over time, but, clearly, it isn’t a commitment many parents are willing to make.

Aside from the costs of diapers and wipes, another cause of “sticker shock” for new parents is the cost of formula and baby food. A conservative estimate of the cost of formula for a baby’s first year is $1,500. An obvious solid financial choice, then, is to breastfeed your baby. As well as saving money on formula, the health benefits of breastfeeding are numerous. (For more on the rewards of breastfeeding, see the La Leche League website at www.llli.org.) Even when factoring in the costs of nursing clothing and renting or buying a breast pump, breastfeeding provides significant savings to parents.

If breastfeeding isn’t an option, parents can save money on formula by:

  • visiting the manufacturers’ websites (most offer money-saving coupons),
  • buying powdered formula in bulk from warehouse stores like Costco and Sam’s Club, and
  • asking pediatricians to recommend a generic or store-brand formula.

When your baby graduates to baby food, consider making your own. Buy a few jars of baby food and get to know your child’s favorites. Note the consistency of the food and begin to experiment at home. Cooking fruits and vegetables, mashing them, and then freezing small portions in ice cube trays is an easy and cheap way to nourish your baby. Your pediatrician will recommend which foods – and in what order – to introduce to your baby at different ages.

Financial planning experts agree that making and keeping a budget is an important way for anyone – especially those suddenly faced with providing for a baby – to keep their spending under control. There are many books and websites that offer budgeting information and tools. Some of the better websites that offer free budgeting tools are www.budgettracker.com, www.debtsteps.com, and www.betterbudgeting.com.

THINK LONG AND HARD BEFORE BUYING EQUIPMENT AND TOYS FOR BABY

Your budget will likely include a category for “miscellaneous” expenses. The excitement of preparing for baby makes some parents throw their usual financial caution to the wind and overspend in this category. You may be swept away by that adorable stuffed animal or convinced that you need every possible safety device to protect your child.

In order to keep from breaking the bank, new parents should pause before buying toys or gadgets for their babies. Although their catalog descriptions claim that you can’t live without them, items like wipes warmers, video baby monitors, fancy diaper pails, and electronic play mats are not in fact “essentials.” Ask friends with older children which baby gadgets and toys they found most helpful.

SEEK OUT QUALITY, USED BABY GEAR

You likely have a neighbor or relative who uses the term “garage sale” as a verb – as in “I love to garage sale.” When you’ve decided to buy something for baby, tell this friend what you are looking for – a certain type of stroller, a bicycle trailer, a high chair, or a bath seat. This will give your friend new purpose in her weekend quests and save you a lot of money. When you drive past a garage sale yourself, slow down and take a quick look. If you see numerous baby items on display, jump out of the car and take a look. Read the ads in the local paper. Call around or check local churches’ websites – many hold annual sales of children’s goods. Check www.ebay.com for clothing, furniture, or other necessities. (You can even buy formula coupons on ebay – check it out!)

Babies grow fast and that bouncy chair or baby bath seat – as useful as it is for a month or two – will soon be relegated to the basement or attic. Don’t bother to buy it new. If someone offers you hand-me-downs, always accept them. Sort them by size and keep them in labeled boxes or bins where you will see them – perhaps in your baby’s closet.

Your baby’s first smile is indeed priceless, but all the paraphernalia that keeps her safe and healthy can cost a small fortune. Plan wisely, and next time you come face to face with that giant stuffed teddy bear, you might want to consider turning around and giving him a friendly wave as you walk out of the store