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One new parent’s essential might be another new parent’s luxury item, but make no mistake — whether you’re scraping by or living comfortably, you’ll likely feel the pinch of parenthood.

And though much has been said about the cost of having a baby and the cost of raising a child to adulthood, a new study suggests that many first-time parents aren’t financially prepared for that crucial first year, no matter how much money they make.

NerdWallet analyzed the expenses of a baby’s first year in two hypothetical households — one with a $40,000 annual income and one with a $200,000 income — to illustrate how families with different resources might navigate these potential costs. We chose the $40,000 income level to represent a lower-income family that wouldn’t qualify for substantial government assistance.

In the $200,000 household, we included the costs of life insurance for both parents, in-home nanny care and the recommended amount of annual college savings, but assumed the $40,000 household might not be able to devote money to these expenses. For both sample households, we considered expenses including food, housing, transportation, diapers, health care costs, and a baby checklist of necessary items.

To find out how closely these estimates aligned with American expectations, we compared our findings with the results of a nationally representative survey, which included parents, nonparents, those currently pregnant or expecting to have a child in the next three years and those not currently expecting to have a child within three years. This survey was conducted online by Harris Poll on behalf of NerdWallet in February 2017.

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These potential expenses could alarm expectant parents, but every family spends differently during a baby’s first year. Families could spend less than these estimates, for example, by purchasing secondhand toys and clothing. To more closely approximate your family’s costs given your location and spending preferences, visit NerdWallet’s baby calculator.

Key findings

Even assuming households making $40,000 would be savvy shoppers when outfitting baby, wouldn’t buy life insurance and wouldn’t start saving for college, the first year of parenting is potentially costly — as much as $21,248 in a $40,000 income household, according to the analysis.

Expectant parents, including those currently pregnant and those planning to have a child in the next three years, dramatically underestimate this cost: 54% of hopeful parents believe their baby’s first year of life will cost $5,000 or less. Americans in general are only slightly more realistic: 44% believe the average U.S. baby’s first year will cost that amount.

Many of those currently expecting or hoping to have a child in coming years expect loved ones to assist with the costs of raising an infant: 61% anticipate friends and family will pitch in more than 20% of the expenses during the baby’s first year.

Among current parents, 57% regret not taking more financial action during the first year of their baby’s life. Their biggest regret: 33% wish they’d started or contributed more to a college savings plan for their child.

Misconceptions about the costs of raising a baby

Americans often severely underestimate just how much it costs to raise a baby in the first year, and those pregnant or planning to have a baby within the next three years are in for the biggest surprise — 36% think it costs between $1,001 and $5,000 to raise the average U.S. baby during its first year, and 18% think it costs $1,000 or less. In comparison, 10% of parents, 11% of nonparents and just 9% of those not currently expecting think the cost is $1,000 or less. The chart below illustrates the cost expectations of those currently pregnant or planning to have a child within the next three years:

Americans also had a difficult time pinpointing the impact of specific baby-related costs. Half of hopeful parents — and 48% of all Americans — think diapering items, including diapers and wipes, are one of the biggest expenses of the first year of a baby’s life. However, we estimate this expense at $743 for the first year — less than nearly all other cost categories in the analysis. By contrast, only 37% correctly believe child care is one of the biggest expenses. Full-time care in a center costs an average of $8,059 for the first year of life — more than any other expense analyzed.

Americans often severely underestimate just how much it costs to raise a baby in the first year, and those pregnant or planning to have a baby within the next three years are in for the biggest surprise

Americans also tended to overestimate certain costs, including life insurance. Among those currently pregnant or expecting to have a child within the next three years, 30% believe life insurance is one of the biggest expenses. But generous policies for two healthy parents cost $762 annually and represent just 1.5% of all first-year expenses in the $200,000 income household, according to the analysis.

» Make these money moves when preparing for a baby

Planning for baby

Parents-to-be who underestimate the cost of a baby’s first year are unlikely to prepare as much as they should. Of current parents, 29% had no money saved up before the baby was born to help with the costs of the child’s first year. And of those who did save, many were likely still short of funds.

Respondents across income levels also showed marked differences in saving. Of those parents and would-be parents earning less than $50,000 per year, 38% said they had no savings or planned on having no savings for their baby’s first year; just 21% of those making $100,000 or more said the same.

This lack of savings could be borne of necessity, but it also could be because folks expect loved ones to pitch in. Of those currently pregnant or planning to have a child in the next three years, 61% expect friends and family to contribute more than 20%, and 25% expect friends and family to contribute more than 50% of the first year’s costs.

Financial planning beyond infancy: College and life insurance

Some of the financial planning steps parents take before and during that first year of life involve their child’s long-term future. College savings can account for 11% of the child-rearing expenses in a $200,000 income household, according to our analysis. More than any other income group, 31% of Americans making $100,000 or more say saving for college in the first year is a top financial priority, and 33% of all parents regret not starting a fund or setting aside more money right away.

As for life insurance for parents, millennials are more likely than any other age group to consider it a top priority in the first year. Nearly one-fourth (24%) of those age 18 to 34 said it’s a priority, compared with 19% of all Americans.

» Overwhelmed? Make a baby budget

Money regrets

Parents may not always look back on that first year satisfied with their money choices, according to the survey — 57% say there are financial actions they regret not taking. Interestingly, those earning $100,000 or more and those earning less than $50,000 had a similar rate of money regrets — 55% and 54%, respectively.