Preparing Your Finances for a New Baby

While having a baby is an exciting time and life-changing experience, raising a child is also expensive. According to the US Department of Agriculture, the average cost of raising a child until the age of 18 is $233,610. This amount may seem overwhelming and even unobtainable. However, by having a sound financial plan and starting as early as you can, you’ll have the resources available to meet your child's needs and still be on track to reach your financial goals.


The moment you decide to have a baby or find out that you’re pregnant is an excellent time to review your finances and create a plan before the baby arrives. Here are a few things to consider when planning financially for your new bundle of joy.

Check your health insurance coverage.

If you just found out that you're expecting a baby or if you're planning for one soon, now is a good time to check your health insurance coverage or sign up for it if you don't currently have it. What's your deductible? What are the out-of-pocket expenses you may have to pay? The more you know what's covered or not covered in your medical policy, the better prepared you'll be to cover the costs. Find out as much as you can ahead of time before the baby arrives and plan accordingly. You don't want any unpleasant surprises when it comes to your budget.

Review your maternity leave.

Do you know how much time your maternity leave covers and how much of your salary you'll receive during your leave? Take a look at your maternity leave and make sure you understand the details so you can prepare your budget while you're on leave. Your maternity leave may not cover 100% of your salary. If that’s your situation, you could start saving extra money to make up the difference in your pay, or you could start living on less beforehand to get in the habit of living on a reduced salary.

Create or revisit your budget.

Even before your new baby arrives, you might find that you're having to adjust your budget as you plan for your new baby. Regardless of whether or not you already have a budget, now is a good time to either create a budget or revisit the one you currently have. Evaluate your expenses to see which ones could be reduced or cut entirely from your budget. You'll certainly want to consider building into your budget baby expenses such as formula, clothing, diapers, childcare, etc. 

There are many ways to budget. The key to successful budgeting is to find a method that works best for you and will motivate you to stick with the plan. If you're new to budgeting or want an easy way to manage your finances, consider the 50-30-20 budget method.

Start a baby saving fund.

While your friends and family may provide you with gifts to assist with the baby's initial needs, there will be other immediate and long-term expenses that come up as you raise your child. You can start saving for those expenses even before your baby arrives by establishing an account for your child's expenses. The better prepared you are to handle those expenses, the easier it will be on your finances.

Also, be sure to check your emergency fund. The unexpected is bound to happen when raising a child. From accidental falls to random visits to the doctor's office or emergency room, you'll want to have funds available to cover the unexpected when it happens. Most financial experts recommend having at least three to six months of living expenses to cover the unexpected.

Need a little help getting started? One easy way to start building a baby savings fund is to open a savings account and use direct deposit to grow your savings.

Set up a registry.

Wait to go shopping. Your parental instinct to start preparing will kick in, but before you start buying all things "baby", set up a registry. You can register for anything from bottles, clothes, diapers, strollers, gift cards, and more. Your family and friends may gift you with most (if not all) of the items on your registry list, so you may want to wait until after the baby shower to shop for additional items you need (saving you time and money).

Don’t be pressured to buy all new.

Of course, you’ll want the best for your child, but don’t give in to the pressure of buying everything new for your baby. Babies grow so fast during the first few years of their life. You may have friends and family who want to give you their child's gently used clothes, toys, books, and other items they're no longer using. Accepting hand-me-downs graciously could save you hundreds of dollars. Also, don’t rule out shopping at yard sales and consignment stores to find bargains.

Update your life insurance policy and will.

Unfortunately, tragic events happen in life. You want to make sure your family is taken care of should one or both parents die. Shortly after the baby is born, and assuming you have a life insurance policy, you'll want to review the policy to ensure you have adequate coverage to meet your family's financial needs (supplemental income and education expenses). Also, you may want to consider adding your child as a beneficiary to the policy.

A will is an essential part of estate planning. It's another way to ensure your family is protected. Make sure you write a will if you don't have one or update it if you do.

Save for college education.

A college education is expensive, but it could be more manageable if you start saving early. The sooner you start, the better. Even though you may think you have plenty of time to save for your child's college education, before you know it, your child is graduating from high school. If they decide to go to college, you'll want to be prepared.

When it comes to saving for your child's education, consider a Coverdell Education Savings Account. It’s a tax-advantaged investment account designed to encourage savings to fund qualified educational expenses. This savings account allows money to grow tax-deferred, which means the funds withdrawn are tax-free as long as they are used for qualified educational purposes such as tuition, books, uniform, academic tutoring, and more. Plus, aside from college expenses, you can use the funds for qualified elementary and secondary education expenses.


Babies need a lot of love, patience, and money. That's why it's so important to include financial planning on your list of things to do before your baby arrives. The sooner you prepare a financial plan for your new arrival, the better it will be for your family.