How to Budget for a Baby

Pregnancy Costs to Consider

There's a wide range of costs during and after pregnancy to be aware of, from health care costs and parental leave to diapers and onesies. Here's what you can expect.

Out-of-Pocket Medical Expenses

Your health insurance may cover prenatal appointments and prescriptions, but you may have to pay out of pocket for parenting classes, body pillows or maternity massages. It's also possible you'll have to meet a deductible before your health insurance kicks in with coverage for maternity care, and that you'll be responsible for paying coinsurance or copays.

Maternity Clothes

The pregnant parent will likely need new clothes, shoes and potentially compression socks, a belly support band or other items to increase their comfort as the baby grows. Consider opting for hand-me-downs from friends or family, or online sites like ThredUp that carry discounted new and secondhand maternity clothes.

Baby Gear

There's lots of practical baby gear to acquire before the baby arrives. Clothes, toys, a crib, a baby monitor, a stroller, baby-proofing for your home and a car seat are all on the essentials list.

Many of the items you'll need for a baby are available secondhand, though a car seat is best bought new unless you're sure that it wasn't involved in any accidents, the restraints have not expired and it hasn't been recalled.

Tip: If you have an old car seat, you can trade it in at certain retailers. For Target, guests who trade in their old car seats receive a 20% off Target Circle Bonus toward a new car seat, car seat base, travel system, stroller or select baby home gear.

Parental Leave

Employed parents-to-be may be eligible for unpaid leave under the Family and Medical Leave Act (FMLA) and additional state provisions, but the rules differ depending on the employer, how long you've worked with the company and other factors. Both mothers and fathers are eligible to take time off for newborn care under FMLA rules. A mother can take time for prenatal care and pregnancy-related health issues, and a father can take leave to care for the mother in certain cases. Your employer may also offer paid time off.

If not all of your time off will be paid, consider saving up sick days and vacation time to help cover your monthly expenses. Check with your employer to see what type of leave they allow, and find out from your state if any benefits will be paid during your time off work. California, for example, provides eight weeks of paid leave at about 70% to 90% of an eligible employee's salary. Short-term disability insurance, which you may be able to get from your employer or on your own, can also be used to cover parental leave.

Learn more: Short-Term vs. Long-Term Disability Insurance: What's the Difference?

Birth Costs to Consider

You may also incur medical expenses relating to delivering your baby, which varies based on your birthing location.

Hospital Birth

The cost of giving birth in a hospital often depends on your health insurance and how the birth goes, but even with insurance, you'll likely have some expenses to cover. On average, out-of-pocket costs for pregnancy, childbirth and postpartum care total $2,854 for a birthing parent with employer-sponsored health insurance, according to the Peterson-KFF Health System Tracker. If you don't have health insurance through an employer, you can get coverage provided through the federal government's marketplace if you sign up within 60 days of delivering a baby.

Home Birth

An at-home childbirth experience costs about 65% less than the typical hospital birth, according to a paper published in 2021 in the International Journal of Environmental Research and Public Health. Keep in mind, however, that you will need immediate medical attention and transportation to the hospital if complications arise.

Tip: If you're considering home birth, call your insurance company to see what they will and won't cover. Some plans only cover certain types of home birth providers, while others allow you more flexibility.

Post-Birth Costs to Consider

Health Insurance

Once the little one arrives, it's time to add them to your health insurance. Employer-provided health insurance gives you 30 days post-delivery to put the baby on your plan; marketplace insurance allows 60 days. Adding a family member may increase the cost of your insurance, but you can switch plans after the birth of a child.

Since the birth of a child is considered a "qualifying life event" per most insurance plans, that means you could potentially switch to your spouse's plan if it's more cost-effective even if your child is born outside of the annual open enrollment period.

Baby Care

Diapers, wipes and a diaper pail are important to budget for, as are additional products like diaper cream, teething products and other baby health care needs. Diapers in particular are a big ongoing expense. Save by signing up for loyalty programs with certain brands, using a subscription service or adding diapers (of multiple sizes) and wipes to your baby registry if you plan to have a baby shower.

Clothes

Babies grow quickly during the first year, and you may find yourself needing to buy new clothes more often than expected. Continue to go for secondhand options, if possible. Check in with other local parents who have older kids and may want to offload baby clothes their kids have outgrown.

Child Care

If you're headed back to work or need breaks while caretaking, child care in the form of a nanny, nanny share or child care facility will be a major cost to prepare for. For one child, full-day child care costs ranged from $6,552 to $15,600 per year on average in 2022, according to the most recent data available from the U.S. Department of Labor.

Prices for child care in a center typically go down as your child gets older, so you'll have a higher upfront cost that will likely, mercifully, decrease. To pay for day care, take advantage of a dependent care flexible spending account (FSA) if your company offers one. Tax credits can also provide some relief for those paying for care so they can work.

Food

You may need to pay for baby formula, and groceries will definitely need to somehow appear in your refrigerator so you and any other caregivers can eat, too. Meal planning in advance—cooking in batches even before the baby comes and freezing some food, if you're up for it—can help you save money on groceries and reduce stress once the baby arrives. Consider signing up for grocery delivery, with automatic reorders on items you use a lot, which is available through delivery services like Amazon and Thrive Market.

Saving for the Baby's Future

It's not too early to start researching tax-advantaged 529 plans and other college saving options. Regularly contributing a small amount to a college fund, even while you're juggling other new expenses, will get you in the habit of saving.

How to Budget for Baby Costs

Budgets are useful at any stage of life. But when you have a child, there are ever more financial priorities to contend with: your retirement, your child's college costs, a higher grocery bill, another plane seat to pay for when you go on vacation. If you've never made a budget before, now is the time to do it. Here's how.

• Map out your current spending. Begin by following where each dollar goes so you account for your spending. Go through bank and credit card statements and hold on to your receipts so you can physically see where your money goes each month. Budgeting apps like You Need a Budget can be particularly helpful during this beginning stage.
• Find a budgeting method that works. It might be a good time to assign a job for every dollar with zero-based budgeting or save money as the default with the "pay yourself first" method. The 50/30/20 rule divides your budget into necessities, discretionary items and a third category for debt payments and savings. Research a few strategies and choose one you'll be able to stick with long-term. If either parent plans to work less, factor in that change in income when making a post-baby budget.
• Check your health insurance. Insurers are required to cover childbirth and maternity care, but coverage differs from one plan to the next. Check the details of your plan, and consider adding your spouse's health insurance as secondary coverage if it offers additional benefits yours doesn't. Adding the new baby to an insurance plan could be free, but it could also increase the premium for certain plans. Find out what additional longer-term insurance costs you may be facing.
• Use all the benefits available to you. Check with your company's benefits manager or HR representative to ensure you're making use of all the employer and insurance perks available to you during pregnancy and after. You may be able to take advantage of a health savings account (HSA) or FSA to save money on medical expenses and, in the case of an FSA, potentially child care.

The Bottom Line

Budgeting is the first step toward financial health as a new parent. As you consider your finances for the coming years, keep your credit in mind. Adding free credit monitoring and focusing on paying down debts can boost your creditworthiness and open doors for future loans, perhaps for a new home or a bigger car, to support your growing family.