Image of happy mom and child laying on bed.

How To Prepare Financially For A Baby

Miranda Crace4-Minute Read
UPDATED: July 27, 2023


Congratulations! Aside from the excitement, joy and related emotions when it comes to pregnancy and beyond, there’s the ongoing question of how to prepare for a baby financially.

While the experience can sometimes feel anxiety-inducing, getting ready for expected and unexpected costs will make a difference when you’re post-labor and too busy worrying about getting enough sleep, making sure your child is healthy, etc.

Let’s take a look at some anticipated costs and what you can do now to prepare for your baby’s arrival.

What Is The Cost Of Raising A Child?

According to a 2017 USDA report, it could set you back $233,610 – or $284,570 if you factor in inflation – to raise a child through age 17. And that’s no small chunk of change. To break some of these costs down, a survey conducted by What to Expect (from the popular book series “What to Expect”) shows that the average weekly cost of day care in 2016 was $211.

Of course, these expenses don’t account for maternity and other postpartum costs. Parents will most likely need to pay for maternity clothing, doctor’s visits (don’t forget ultrasound and lab work), the actual birth and any checkups after birth. There are also the extra costs of food for mother and baby. Don’t forget, the mother needs time off – depending on the employer, you may or may not get paid for it.

Ok everything sounds alarming, especially for first-time parents who likely need to buy everything (crib, stroller, etc.). But remember what an exciting time this is too!

Doing one-in-a-lifetime moments with your partner like designing the first nursery in your home or scheduling your maternity photos. To properly handle the large numbers and the amount of expenses you’ll need to consider, many financial experts recommend that parents always have a sizable amount of cash on hand – at least $5,000, depending on their needs.

What Are Some Things I Can Do Now To Prepare For My Baby?

It might feel overwhelming, but financially preparing now will help you with any unexpected bills and finding ways to cut costs (hello hand-me-downs!)

Here’s a quick list to get you started:

Start (Or Increase) Your Emergency Fund

This can be one of the smartest financial moves you make if you haven’t already started. Having extra cash on hand in case of any unforeseen circumstances can prevent you from going into debt to pay for them.

Review Your Health Insurance

Take a look at what you need to do to add your baby on your plan. Plus, check to see how much health care costs, including pregnancy and postpartum doctor’s visits.

Plan For Maternity Or Paternity Leave

Taking time off could mean reduced income for the next few weeks (or however long you’re planning). It’s also a good idea to talk to your employer so you can plan ahead.

Make A Post-Baby Budget

Right now, it’s hypothetical since you don’t really know how much things will cost, like child care or diapers. However, using a baby calculator and allocating your funds now can help you see where you may need to cut back in other areas.

Review Life And Disability Insurance Needs

Make sure you update any beneficiaries and check to see whether your policy amounts need to change.

Create A List Of Items You’ll Need For The Baby

Gift registries are not just for weddings. Feel free to ask your family and friends. There are also a ton of baby checklists available online.

Pay Off As Much Debt As Possible

You want to get off on the right financial foot before the baby arrives. This could mean paying off as much high-interest debt as possible.

Start A Savings Account For The Baby As Early As Possible

That way, if family and friends gift money or bonds there is already place where you can start saving for your child's future.

Adjust Your Will

Estate planning is an important part of a sound financial plan. This would be a good time to take a look at your assets and who would assume guardianship in case both parents are no longer here while your child is still young.

Don’t Forget Your Retirement!

Just because you have to spend more to take care of your little one, doesn’t mean you should ignore saving for your future.

How Can I Raise A Child On A Budget?

While raising a child can significantly increase your spending, there are ways to save costs. Here are a few ideas.

1. Consider Opening HSA Or FSA Accounts

Contributing to a health savings account (HSA) can save you money on health care costs since you may use the money tax-free. There are also other tax benefits since the money you give reduces your taxable income. Same goes for a flexible savings account (FSA). The difference is that for a FSA account, you typically need to use up your funds within a calendar year – in some cases you can roll over $500, but that’s it.

But a FSA account can help you save on other costs, like child care. A dependent care flexible savings account is a tax-advantaged account specifically for qualifying dependent costs like day care.

2. Shop Around For Child Care

Unfortunately, child care is expensive – some more than others, depending on your local area and number of child care centers available. Ask around to gather recommendations and make sure to tour facilities.

Also remember that in some cases, in-home day care can offer proper care, just as good as larger chains. Shopping around can help you compare costs and find a fit you're comfortable with.

3. Buy Used

The truth is, there are many items you can buy that are perfectly good used. Many resale or consignment stores sell gently used items like toys, books and clothing. Even larger ticket items like furniture can be sourced – but be extra careful to make sure it’s clean and safe for baby.

An even better option is to see if you can get items for free. Ask friends and family for hand-me-downs or request specific items for your baby shower.

4. Stay In-Network

Staying in-network can save you costs when it comes to seeing a pediatrician. You’ll want to prepare ahead of time since your baby’s first pediatric appointment will be within their first week of birth. You can also ask friends and family for recommendations, plus call ahead to find out if this person is within your network. That way, you can save on out-of-network charges.

5. Anticipate Change

Even if you’re a budgeting ninja, raising a child comes with a lot of unexpected circumstances down the road. That means your spending can change as well. For example, as your child care costs go down, your food bill can go up. Or your medical costs can increase because your child gets sick quite often once they’re in school.

Whatever the situation, it’s crucial that you and your family review your budget every month to see what was spent and keep an eye toward the future. In some cases, you may not have enough money to cover expenses – you’ll need to consider finding ways to increase income or cut back on other short-term goals like a family vacation.

Raising a child is an extremely rewarding adventure. But before you have your baby, remember to look ahead and keep in mind that you don’t need to spend a lot of money on unnecessary items to ensure your child's happy and healthy for years to come. 

Ready To Improve Your Financial Life?

Apply for a personal loan today to consolidate your debt.

Miranda Crace

Miranda Crace is a Senior Section Editor for the Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate, and personal loans for over 10 years.