Raising a family comes at a considerable cost

Children are one of life’s great joys, but this joy doesn’t come cheap. Just ask Scott Leonard, a Redondo Beach financial planner and father of three.

“It’s death from a thousand paper cuts,” Leonard said. “No one thing is overwhelmingly expensive, but there are an endless number of little things that are going to cost you $50 or $100.”

New parents are frequently shocked at what a budget buster having a baby can be. Even financial professionals say that their educations failed them when it came to adequately preparing for the cost of a child. Sure, they knew that they’d have to buy life insurance, start saving for the kid’s college bills and fork out some dough to write a will and an estate plan. But dozens of other costs came as a surprise.

“A lot of this stuff just slaps you in the face,” said John Ulzheimer, president of Credit.com Educational Services in Atlanta, whose first child is due to arrive this week. “I have things in my basement and I have no clue what they are. I don’t know how to put them together, but apparently I need them.”

What were the costs that most surprised the experts, and how do they advise prospective parents to keep them in check?

Cost shock #1: Medical expenses

Even with a great health plan, parents will find themselves shouldering hundreds if not thousands of dollars in medical bills related to the pregnancy, birth and neonatal care.

Susan Black, director of financial planning at EMoney Advisor, a Philadelphia-based wealth planning and management company, said her out-of-pocket costs hit $1,000 when she had her daughter 10 months ago. Leonard, president of Leonard Wealth Management in Redondo Beach, said his 11-month-old set him back $7,500 in deductibles and co-payments.

Solution: Check with your health insurer to see whether your choice of facility and doctor will affect your out-of-pocket costs. Also find out how much your annual deductible is and what the limit is on how much you may have to pay out of pocket.

If you have time, consider saving for uninsured medical costs in advance, ideally through a work-based healthcare account, Black said. These accounts allow workers to set aside money on a pretax basis. It’s your money, but because it’s taken out of your pay before taxes are computed, you save on income taxes. For those in a 30% tax bracket (counting state as well as federal), that means a $1,000 expense would cost $700 on an after-tax basis.

Leonard, who with his wife, Mandi, has three boys ranging in age from 11 months to 7, also suggests that parents get familiar with their emergency and urgent-care coverage. This can save a fortune when the kids are a little older, he said.

“Ear infections invariably strike at 2 in the morning and every accident happens on the weekend,” he said, sighing. “It’s inevitable that you’ll use it.”

Cost shock #2: Outfitting the baby

Putting together the nursery, complete with bassinette and changing table, can cost thousands, Black said. And that’s before parents shell out hundreds for bouncers, swings, high chairs and potties. A child cost calculator at www.babycenter.com figures that food, clothing and other items set parents back more than $6,000 a year.

Why is it so expensive? Every child will need three car seats -- an infant seat, a toddler seat and a “booster” seat -- before graduating to just a seat belt, Leonard said. Plus the baby will need a crib, a playpen and a stroller. And kids can grow out of clothes faster than their parents can cut the price tags off.

Along the way, other parents -- or shopkeepers -- will suggest dozens of additional products, often when parents are most vulnerable.

“You’ll have this crying baby and somebody will say, ‘Have you tried the supersonic swing?’ ” Leonard said. “At that moment, you don’t know what it is; you don’t care what it costs. You’re going to buy it. You’ll do anything to get your child to stop crying.”

Solution: Consult with a veteran and buy used.

Ulzheimer, 38, said that because he and his wife, Monica, waited so long to have children, they had many friends with experience. They’ve enlisted those friends to help when shopping for baby gear.

“They’ll tell us, ‘You definitely need that’ ... ‘that’s a waste of money,’ ” Ulzheimer said.

Linda Murray, editor in chief of BabyCenter in San Francisco, said the website’s members raved about buying baby equipment on EBay. Murray doesn’t recommend buying car seats this way because a used seat could be damaged and affect safety, but she says it makes sense to buy many lightly used items.

“I have all these baby clothes that I put away because they were too big. And then I waited too long and missed my window of opportunity,” Murray said. “I have all these things for my daughter that no longer fit that still have the tags on.”

Those who plan to have more children might buy new clothes with the expectation that the next child will wear them as well. Those who don’t might consider buying lightly used clothing, as well as high chairs, walkers, bouncers and swings, all of which can be a bargain.

Don’t get too caught up in the retail frenzy, Murray cautioned.

“In the end, kids need love, food, a few things to wear and a place to sleep,” she said. “Everything else is gravy.”

Cost shock #3: Day care

For two-income families, day care can be a huge cost, the experts agree. Facilities can charge $200 to $400 a week. On top of that, you may have to pay extra for every minute you show up late to pick up your child.

A good nanny will cost considerably more -- particularly if she drives, Leonard said. In addition, the nanny would be an employee, so the parents would need to budget in taxes, vacation and sick pay, he said.

Solution: If your employer offers it, sign up for a dependent-care account. Like health spending accounts, these programs allow you to save your own money, but on a pretax basis. The maximum you can set aside is $5,000 a year, which may only make a dent in your day-care expenses. But it helps. Putting the maximum in a dependent-care account would save a family in the 30% bracket a tidy $1,500 a year in taxes.

Dependent-care accounts cannot be used to cover tuition at private schools (except for preschool). But if a child goes to summer camp so his or her parents can work year-round, the cost of the camp can be paid through a pretax account.

Cost shock #4: Private school

Forget college. The price of private preschool, kindergarten, elementary school, middle school and high school can knock your socks off, said Ulzheimer, who says in many areas, including the part of Georgia where he lives, public education is not an option many parents want to consider.

“You pretty much have to send your kids to private schools here,” he said.

If that’s how you feel about where you live, be prepared to spend $5,000 to $15,000 a year for private elementary school -- and more for private high school.

Solution: Move.

Finding a house in a top school district can save thousands of dollars a year. Even if the new house costs more, remember that mortgage interest is deductible but private school expenses aren’t.

Cost shock #5: Entertainment

Baby-sitting costs about $10 an hour, and more if you have more than one child, the experts agree. That can make the cost of going to dinner and a movie prohibitive.

“You pretty much figure you’ve got to add $60 to anything you do,” Leonard said. “And if you try and take the kids on vacation, it really adds up.”

It’s not just the cost of five plane tickets, he added. It’s that his growing family needs two hotel rooms and two taxis -- partly to fit all their baby gear. And the cost of feeding five at restaurants for three meals a day can be staggering. Family vacations require renting a condominium rather than a room, he said. “It’s really expensive.”

Solution: Stay home.

Face it. You don’t have the money to go out anymore, Murray said. Sure, once in a while you’ll save up for that big trip to Disney World, but it’s not like you’ll have the time to relax on a sandy beach anyway. Get comfortable at home, she suggested.

“Your life is basically over in terms of socializing or traveling,” Murray said. “But what you save in terms of going to restaurants and taking vacations offsets some of the cost of having the baby.”

Lacking the time or energy for entertainment is the bright side of baby economics, Ulzheimer said. “You change your focus from vacations and nice cars to tuition and formula. It isn’t how much we are spending, it’s where the money is going.”

Plus, Murray said as she packed her 5-year-old off for day care, “having a child is so magical that you don’t even miss the movies.”

kathy.kristof@latimes.com

Kathy M. Kristof welcomes your comments but regrets that she cannot respond to every question. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof@latimes.com. For previous columns, visit latimes .com/kristof.