Having a child is one of life’s biggest blessings, but also one of the biggest financial responsibilities you’ll ever take on. While there’s no “perfect way” to prepare and you may never feel 100% ready, the more intentional you are with your money ahead of time, the smoother your transition into parenthood will be.

As a mom of two, with a third on the way, I can tell you firsthand: kids are worth every penny, but they are very expensive. 

From diapers and daycare to healthcare and future education, activities and celebrations, costs add up quickly. That’s why planning ahead matters so much, so you can actually enjoy the journey instead of being weighed down by money stress and financial pressure.

The Real Cost of Raising a Child

The U.S. Department of Agriculture (USDA) estimates that, “Middle-income, married-couple parents of a child born in 2015 may expect to spend $233,610 for food, shelter, and other necessities to raise a child through age 17. This does not include the cost of a college education.” (1) Factor in inflation, and the number jumps even higher. 

But despite this significant financial responsibility and cost associated with raising children, people will continue to have children and grow their families. Why? At least from my experience, parenting will go down as one of the most rewarding journeys I’ll ever be on. The financial and money side of it just requires some forethought. 

We all know kids are expensive… and yet, most of us are going to dive in anyway. So let’s talk about how to actually prepare financially for these little humans who somehow come with very big price tags.

9 Smart Ways to Financially Prepare for a Baby 

1. Review Your Health Insurance and Budget for Medical Costs

• Get an understanding of and budget for the costs associated with the birth of the baby – hospital charges, ultrasounds, potential time in the NICU, etc.

• Identify the procedures that will be covered versus what you’ll pay out of pocket

• Plan for higher monthly premiums once you add your child to your policy

Side Note: Call your insurance provider and ask for a cost estimate worksheet based on your plan. The earlier you know what to expect, the less stressful those bills will be.

2. Understand Your Maternity and Paternity Leave Policies

Every employer and state handles parental leave differently. Some policies offer fully paid leave, others partially paid, and some unpaid (which is absurd and a whole other conversation). So, get clear on what’s available to your before baby arrives.

Here are the big pieces to look at:

• Employer Leave Policies: Find out how much leave is offered, which portion is paid, and how much may be unpaid.

• Short-Term Disability Insurance: Many employers (or private policies) cover 40–70% of your income for 6–8 weeks after delivery, sometimes longer with complications. If your employer doesn’t offer it, you may have the option to purchase it separately.

• State Paid Family Leave: Certain states provide wage replacement during parental leave, check if yours does.

• PTO/Vacation Days: See if you can stockpile vacation days to extend paid maternity/paternity leave. 

• Health Insurance Premiums: If your leave is unpaid, remember you’ll still owe your share of premiums.

• Income Gap Planning: Even with these benefits, most families face reduced income during leave in some capacity. Start saving ahead to give yourself a cushion AND flexibility.

3. Consider Life Insurance

Life insurance may not be the most exciting baby prep task, but it’s one of the most important to consider. A policy ensures your child and partner are financially supported if the unthinkable happens.

Aim for a policy that would cover: 

• Several years of living expenses

• The payoff of significant debts – like Mortgages, car loans, or significant credit card debts. 

• The future of childcare and education goal costs

4. Plan for Childcare (One of the Biggest Costs You’ll Face As a Parent)

Childcare is often the largest monthly expense families face, sometimes (oftentimes) rivaling a mortgage payment. Start exploring what your options are now.

• Full time Nanny vs. Nanny Share vs. daycare vs. family help
  
  • Take a peek at the cost differentials for each option, but don’t just look at the price tag. Think about…
    
    • Convenience – like the time you’ll spend on drop offs and pick ups, who handles meals, and how much flexibility each option gives your family’s schedule
      
    • Social Interaction – is there an environment you want your kids in at different times/ages of their childhood|
      
    • Also consider full-time vs. part-time care

5. Open a Savings, Investment or College Education Account For Your Child

Once your child has a Social Security number, you can open accounts like:

• 529 College Savings Plan (tax-advantaged college savings)

• UTMA/UGMA custodial accounts for more flexible purposes

• A simple high-yield savings account for short-term needs

• Even small contributions add up over 18 years. The sooner you start, the more time compounding has to work its magic and the less stress you’ll feel over the course of their childhood.

6. Create or Update a Will or Trust

If you don’t already have an estate plan, now is the time to consider one. A will or living trust ensures your assets go where you want them to and, most importantly, appoints guardianship for your children. Without it, the courts decide, which is simply not how anyone wants their children’s future decided.

7. Get Serious About Paying Off Existing Debt

Once that baby comes, life will get busy and life will get more expensive and if you can’t prioritize paying down the debt now….it will be VERY difficult for you to prioritize later on in life with more financial responsibilities added to your plate.

• List out all your debts

• Prioritize paying off high interest balances (like credit cards)

• Create a repayment plan before baby arrives

Trust me, once those sleepless nights hit, aggressively tackling debt will feel 10x harder. Prioritize this before the baby comes! 

8. Embrace Secondhand Baby Gear

Despite what new parents think (I was there too years ago and am in a very different place with baby #3 coming), babies don’t need all the shiny new things. 

In fact, many items are only used for a few months. Aside from diapers, soaps or creams – embrace used baby strollers, bassinets, newborn swings, snow gear, clothes, etc. 

Much of the initial baby gear is so expensive and yet used for such a short period of time. Family, neighbors, friends, Facebook marketplace, etc. are all great places to explore your options and cost savings and believe me when I say they’ll be thrilled to get rid some of their own baby clutter if they’re done with it! 

9. Don’t Fall Into the “Buy Everything” Trap

Learn from my expensive mistake: you do not need 20 swaddles, 50 washcloths, and every gadget Amazon recommends. 

Start small. Buy essentials first, then add items as you truly need them. Babies are pretty simple and low maintenance (for the most part) and often, what worked for someone else’s child won’t work for yours. The clutter will likely overwhelm you so just start simple and build up for what you need as time goes on. Those 3am Amazon purchases may be in your future 🙂

And One More Thing – Learn From My Expensive Mistake

Prepare Early, Stress Less

Having children will always be a mix of joy and financial responsibility. The earlier you prepare, the more confident and relaxed you’ll feel when your little one arrives.

So whether it’s adjusting insurance, setting up savings accounts, or learning to love hand me downs, remember: you don’t need to do everything at once, just start with one simple step and go from there.

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