Budgeting for a Baby: A Financial Planning Checklist for New Parents

Family with newborn baby budgeting for a baby

Key Takeaways

  • The estimated cost of raising a child from birth to age 17 is $374,634 for a middle-income married couple. Adoption can cost from a few thousand dollars up to $45,000.
  • The average cost of giving birth in the US ranges from just over $5,000 to well over $19,000, depending on the state. Budget for medical costs like checkups and vaccinations too.
  • Consider how much paid vs unpaid parental leave you and your partner will receive. Save enough to cover reduced income during unpaid leave. Keep contributing to retirement if possible.
  • Factor in ongoing costs for food, diapers, clothing etc. as well as one-time purchases like cribs and strollers. Update your budget accordingly.
  • Childcare could cost thousands per year depending on your situation. Review parent leave, work arrangements, and help from relatives to estimate costs. Consider life insurance to help financially protect your new addition.

Whether you're a new parent — or you have a little one on the way — parenthood comes with an endless list of tasks. Chances are you're planning the gender reveal party and sprucing up the spare bedroom with considerable attention to detail (it's robin's-egg blue, not sky blue). But have you also started budgeting for a baby?

The Cost of Raising a Child

The estimated cost of raising a child from birth to age 17 is $374,634 for a middle-income married couple.1 Are you considering adoption? If so, you're looking at anywhere from an additional few thousand dollars for a local adoption through the public welfare system, to up to $45,000 for adoption.

The cost of having a baby can be sizable, but there are ways to prepare financially for your new bundle of joy. The following financial planning checklist could help you get on the right track before the stork pays you a visit.

Anticipate Medical Costs

The average cost of childbirth in the U.S. varies dramatically from state to state but can range anywhere from just over $5,000 in Mississippi to well over $19,000 in DC.3

In addition to the costs associated with giving birth, you will need to budget for medical care like routine checkups and vaccinations. Examine your health insurance policy to see what's covered and what you'll need to pay out of pocket.

Prepare for Parental Leave

How much parental leave will you and your partner receive from your respective employers? Will you receive paid maternity or paternity leave, or will it be unpaid time off? No matter how you slice and dice your parental leave, your expenses will spike due to the additional costs of having a baby.

The Family and Medical Leave Act (FMLA) grants eligible employees in the U.S. a minimum of 12 weeks unpaid parental leave during their first 12 months of parenthood.4 In a survey from Zippia.com, they found out that only 40% of employers offer paid maternity leave, with 70% of the surveyed women taking the maternity leave, paid or unpaid.5 If you end up taking unpaid time off to care for your baby, make sure you have enough squirreled away to make up for the reduced income.

Another thing to keep in mind? During parental leave, it could be a good idea to keep up contributions to your employer-sponsored retirement fund. To stay on track with your retirement goals, sock away extra money once you return to work or make contributions to an individual retirement account (IRA) outside of work.

Review Everyday Expenses

Your budget for everyday expenses will change once the baby comes. Consider the costs of ongoing basic living expenses for babies, such as food, diapers and clothing — which they'll outgrow in the blink of an eye.

Also consider the costs of one-time or periodic purchases, such as a crib, stroller, car seat, diaper bag and more. Preparing for these costs and factoring them into your budget will help you keep your short- and long-term financial goals in check.

Estimate Child Care Costs

Depending on where you live, your current situation and your child-care needs, you could spend thousands annually for child care costs.6

The costs of child care will depend on many factors: How much parental leave will you get from your employer? Will you or your partner become a stay-at-home parent? Will you or your partner work from home? Will you receive help with child care from a close friend or relative?

Consider Life Insurance

Another item for your baby-on-a-budget checklist? Consider financial protection for your new addition in case of the unexpected. If you already have a life insurance policy, you may want to review your coverage to make sure it provides sufficient protection for your expanded family. A financial representative could help you determine your new coverage needs.

You may also want to consider purchasing a life insurance policy for your newborn, which could help secure a bright financial future for your child. Life insurance could provide guaranteed insurability for your child as they grow — and it could also build up cash value over time, depending on the policy. You can buy life insurance for a baby by either purchasing a new policy or adding a rider to your existing life insurance.

The Bottom Line

Between choosing a name, setting up the nursery furniture and finding the perfect outfit for their first photo shoot, you have a lot to do before you bring your new baby home. Financial considerations are an essential part of preparing for the stork's arrival — and by budgeting for a baby, you'll help start your new life together on firm footing.

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  1. Just How Much Does It Cost To Raise a Child These Days? https://www.parents.com/the-cost-of-raising-a-child-7503595.
  2. How Much It Costs to Adopt a Child. https://www.parents.com/parenting/adoption/facts/the-cost-of-adoption/.
  3. Child Care Costs by State 2023. https://worldpopulationreview.com/state-rankings/child-care-costs-by-state.
  4. Family and Medical Leave Act. https://www.dol.gov/agencies/whd/fmla.
  5. AVERAGE PAID MATERNITY LEAVE IN THE US [2023]: US MATERNITY LEAVE STATISTICS. https://www.zippia.com/advice/average-paid-maternity-leave/.
  6. Average Cost of Child Care. https://www.valuepenguin.com/average-cost-child-care.

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