Budget for a Baby (Without Going Into Debt)


A stork flying with a baby bundle

From hospital bills to daycare expenses, your financial life is about to change.

Lara Hourquebie and her husband started saving immediately when they found out she was pregnant with their first child.  

“We had no savings and we knew our expenses would increase,” Hourquebie says. “We saved every dime my entire pregnancy.”

At the time, the Washington, D.C.-area couple were still paying off expenses from their wedding and Hourquebie’s husband was underemployed.

“We tried to be resourceful by not eating out a lot, and instead we hosted at our apartment,” Hourquebie says. “It was not fun at the time.”

Budgets for babies are anything but small. While building a family is usually a joyful occasion for new parents, making sure you’re financially prepared can lead to less worry later on. 

How much do babies cost?

When it’s your first child, it’s easy to become overwhelmed with financial decisions. From diapers to daycare, expenses can seem endless when it comes to raising a new human. It’s also tempting to buy your little one the cutest onesies and a top-of-the-line bassinet.

“People are excited and can overspend on baby clothes and baby furniture,” says Barbara O’Neill, Ph.D., the owner and CEO of MoneyTalk and a certified financial planner. “It’s adding a lot of new expenses to your cash flow that you haven’t had previously.”

New parents spend about $2,700 on essentials like a high chair, disposable diapers, formula, and other baby items in the first year, reports a Walmart article. But the growing costs don’t stop there.

The average cost for the first year of a child’s life on average is $12,680, according to a report from the U.S. Department of Agriculture. And the average cost for raising a child until the age of 17 clocks in at more than $233,00 — which doesn’t factor in money set aside for college savings. 

On top of all this, baby-related expenses can be unpredictable and start before newborns even arrive. Not all pregnancies are ideally timed, and expenses such as extra medical bills and maternity clothes can add up quickly.

With all these costs in mind, below are five tips to help expectant parents financially prepare for their newest family member.

1. Create a budget to determine where you can save

Maybe you’ve never been much of a “budget-person.” In fact, only 42% of Americans use a budget, according to the National Foundation for Credit Counseling 2019 Consumer Financial Literacy Survey.

When you’re having a child, creating a budget can be an important first step to help prepare for the big rush of new expenses coming your way. But just like Hourquebie did, it’s important to do so before the baby arrives instead of after.

Looking under the hood at the past 3 to 6 months of your spending can reveal opportunities to trim expenses and save for your baby budget, says Brooke Cassady, a certified financial planner. She recommends that expectant parents save enough money for the cost of delivery and postpartum expenses, such as loss of income during maternity leave.

“If you can at least save the amount you would spend without the mother’s income during that time, that would be a great place to start,” Cassady says.

Not sure how much money you actually need to save for your impending arrival? We’ve created a tool to help you map out your expenses:

PDF icon Download our Baby Budget Worksheet here.

Baby Budget Worksheet

2. Understand potential out-of-pocket medical costs 

Navigating her health insurance plan to figure out how much she should budget to deliver her child was stressful for Hourquebie when she was pregnant. After birth, she and her husband worked with the hospital to set up an interest-free payment plan to slowly pay down the cost.

 “We are still paying off his birth three years later,” Hourquebie says. “We didn’t have the ability to throw out $5,000.”

Hourquebie isn’t alone in having a four-figure bill to pay off after delivering a bundle of joy. The average out-of-pocket health care bill for prenatal care, delivery, and three months postpartum (after the birth) is $4,569, reports a 2020 Health Affairs study. Cost is also dependent on the type of birth (vaginal or cesarean).

If your little angel decides to come earlier than anticipated, a preterm birth can average around $65,000, which includes costs such as medical care, maternal delivery, early intervention services, and more, according to the 2019 March of Dimes Report Card.

Because pregnancies can be unpredictable, having extra money set aside in an emergency fund for medical issues for mom or baby is a good idea, Cassady says.

Meredith Huck of Milford, Connecticut, incurred a $25,000 procedure her son needed nine months after he was born. Insurance covered part of the treatment and they used their savings to pay the $12,000 deductible. 

“We didn’t know he would be sick and we didn’t expect to hit our deductible in June of a calendar year,” Huck says.

3. Find creative ways to reduce child care costs 

The Hourquebie family budget revolves around child care. About 25% of the family’s salary goes towards paying their son’s full-time day care.

“Child care is the foundation for our budget,” Hourquebie says. “We work all of our other expenses around that.”

Child care costs can hit families hard financially. The 2019 Cost of Care survey from Care.com reported 31% of working parents put themselves further into debt to afford care.

To alleviate costs in this area, Robert Gariano, a financial consultant who specializes in helping millennials and new families budget, suggests relying on family that may be retired or nearby to help care for your new baby.

“If you can find a way to facilitate a family member or partner up with friends for a joint nanny-share during the day, it can really cut child care costs,” Gariano says.

Remote work is another option that can help parents save money on child care  — if that is something your employer allows. A couple of months after Hourquebie gave birth, she started working at The Mom Project, an organization that provides flexible opportunities for moms in the workforce. Working for The Mom Project gave her the flexibility to work remotely 100% of the time.

If you need to hire someone to watch the baby while you work from home, the option to work remote can help cut down on the number of hours you need to pay for child care. You may not need to pay a nanny or sitter for the time you would normally spend commuting, and you can also cut down on your transportation costs.

4. Identify places to skimp

Little ones grow quickly. Huck rarely buys new things for her children.  

“My daughter is a new shoe size every month,” Huck says, who has found lots of ways to save money. She found baby furniture like a crib on Facebook Marketplace and has received baby gear from family hand-me-downs and baby showers.

Buying the bare necessities of baby gear like a car seat, crib, diaper bag, changing table, baby monitor, and stroller can add up. It’s important to think critically about baby costs so you don’t go into debt from unnecessary purchases.

“Children tend to outgrow clothing quickly, so think of how long everything you’re purchasing will last,” O’Neill says.

While it is important to buy baby basics with up-to-date safety standards, purchasing from thrift stores and second-hand shops can decrease the impact to your wallet compared to retail prices.

“You don’t need the best one out there, just make sure it’s quality, so it won’t fall apart,” Gariano says. “Do what makes sense for your budget.”

Another area for potential savings is to make your own baby food. All you need is a food processor. Cassady found making her own baby food was more cost-effective than buying individual jars at the store. She’d make baby food in bulk and freeze it. 

5. Use all your resources

Be sure to take advantage of resources that are already at your disposal. Here are a few to research as soon as possible:

Community and government programs: If your family qualifies, reach out to community organizations that can help secure monetary aid and baby-related resources. Churches, co-op extensions, hospitals, and other community aid organizations that focus on life-skills planning can also provide information about parenting and child development.

Governmental programs like the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) provide nutrient-rich food and health care referrals for eligible low-income women and to infants up to age five. The program also supports pregnant women.

The Supplemental Nutrition Assistance Program (SNAP) is a similar governmental aid program that assists families to purchase healthy food.

Potential tax breaks: After giving birth, take advantage of tax breaks that are available. You’ll also need to adjust your withholdings and file a new W-4 with your employer. 

“This will put more money in your paycheck or give you a big tax refund,” O’Neill says.

Additionally, ask your employer if they offer a Dependent Care Flexible Spending Account, which allows parents to put away a set amount of pretax money for qualifying child care expenses.

Insurance: Make sure to find out what needs your insurance will cover. Breast pumps and lactation counseling are often supported by insurance plans. 

Article contributors
Brooke Cassady

Brooke Cassady, a certified financial planner with a master of arts in applied economics, provides comprehensive financial life planning and financial counseling services to individuals and families. She currently holds positions as both practitioner and in academia.

Robert Gariano

Robert Gariano is a certified financial planner who focuses on helping older millennials and new parents navigate through personal financial matters, such as cash flow, home purchasing, educational funding, life insurance, as well as tax and estate planning. Rob joined Gariano Wealth Management in 2014 after previously holding positions at Morgan Stanley and Lord Abbett, where he earned the Series 7 and Series 66 registrations as well as his life, health, and accident insurance license.

Barbara O'Neill

Dr. Barbara O’Neill, a certified financial planner and accredited financial counselor, is the owner/CEO of Money Talk: Financial Planning Seminars and Publications where she writes, speaks, and reviews content about personal finance. A distinguished professor emeritus at Rutgers University, after 41 years of service as a Rutgers Cooperative Extension educator and personal finance specialist, she has written more than 160 articles for academic publications and received more than 35 national awards and $1.2 million in grants to support her financial education programs and research. O’Neill is a past president of the Association for Financial Counseling and Planning Education (AFCPE), a recipient of the AFCPE Distinguished Fellow Award, and a Next Gen personal finance fellow. Tweet her @moneytalk1.

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