Father holding up baby, baby feet in the foreground.

How To Budget For A Baby

4-minute readNovember 02, 2020

When we find out that we’re going to be parents, all reactions are fair game. You can go from elated to nervous to terrified all in the first 5 minutes of learning you’re going to have a baby. This is one of the most life-changing moments you may ever have, so it’s reasonable to experience all of those intense feelings.As the heightened emotions start to subside, we may immediately question our preparedness. I know I did. Thoughts about our home being safe enough, our school district being up to par and whether we were ready financially took over my brain as I embraced the fact that I was going to be a father. Evidently, there’s some science around this type of “fatherhood protection mode” that I went through.Because I like diving into the numbers, I instinctively turned to our budget first. I wanted to make sure we were financially prepared because babies are expensive. In the first year, raising a baby costs $13,186 on average. This wasn’t a number we were prepared for.Through much trial and error over the next couple of years, we now understand how to budget for a baby. Here’s what we learned about preparing such a budget, along with some important expenses to consider if you’re wondering how much to save for a baby.

Preparing Your Finances For A Baby

The best place to start when budgeting for a baby is developing the budget. This can easily be done through user-friendly apps like Mint, Tiller or Zeta. If you’re not into fintech, then use a spreadsheet or a good old-fashioned piece of paper to calculate your income and expenses. You want to know how much is coming in and how much is going out in a typical month.
If you have some time before your baby is born, a great goal would be to fully finance an emergency fund. This is money set aside for the unexpected moments of parenthood. Having 3-6 months of expenses saved up will help you sleep easier at night.
As you’re assessing your budget and building up your savings, see how much you’re paying in credit card interest. If you consistently see hundreds or even thousands of dollars going out the door in interest payments, this should be an immediate focus area. Since this new baby will be taking up more of your budget in year one and beyond, you’re going to want to eliminate as many unneeded payments as possible. Rocket HomesSM is an excellent resource that details your debts, provides you information on areas of improvement with your credit report and gives you your credit score for free.

Baby’s First Expenses

As we improve our financial situation, we may start to see a little breathing room in our budget. This will give us an opportunity to plan and prepare for our baby’s first expenses.

Here are the some of the major costs that fall within first year of a newborn’s life:

Toys, Diapers and Strollers

We need to entertain them, move them around in public and change their diapers. Around 30% (or $3,955) of the first year’s baby budget can be taken up through toys, diapers and strollers.


Another human in the house means you have another mouth to feed. While babies don’t eat as much compared to adults, formula can cost a pretty penny in the first year. About 28% of the baby budget (or $3,692) goes to food in the first year.


Once you return to work after paternity and maternity leave, plans and expenses for childcare start to go into effect. This can account for around 13% of the baby budget (or $1,174).


Just like adults, babies need medical care too. And in the first year of life, this can be more costly than normal. In year one, 17% of the baby budget (or $2,241) may go to healthcare.


With babies, there’s a whole lot of miscellaneous expenses that you never even thought of before. 12% of your first-year baby budget (or around $1,582) should be set aside for miscellaneous expenses.

Planning For The Future

Outside of the daily expenses that keep a child fed, entertained and healthy, it’s important to look further out into the future. After all, your baby won’t always be a baby.
The cost of college is a serious consideration for young parents nowadays. It’s more important than ever to plan ahead and save for our kids’ education early and often.
For example, starting a 529 college savings account is a smart financial move to consider if you have room in your budget. This account can take advantage of compounding growth by investing in the stock market. By getting ahead of things, you’re hopefully setting your kids up with a nice five or six-figure sum for tuition instead of the frightening reality of a six-figures student debt.
Another financially smart consideration is to purchase a low-cost term life insurance policy to protect your family from the unexpected. If your family relies on your income and you’re suddenly no longer in the picture, term life insurance gives your family the coverage they need to move on with their lives without financial distress and worry.

Ways To Save Money When Budgeting For A Baby

All this talk of additional expenses may be overwhelming. Instead of hiding under our beds and hoping the financial problem will go away, let’s talk about some action steps to prepare. We only get one shot to be a first-time parent!

Reassess Your Spending

With a new baby coming, it may be time for you to adjust spending to save more. The big three expenses (housing, transportation and food) are the best places to start because they can have the biggest impact on your budget.

Shop Used (Thrift Stores Or Clothing Swaps)

Babies grow fast! That beautiful brand-new outfit may look cute now, but remember that your baby will grow out of it in a matter of months. Check out “Mom-to-Mom Sales” in your neighborhood, visit your local thrift store or meet with other parents who you can swap baby clothes with. This will help you save quite a bit of cash.

Ask For Support From Family

If you’re close to your parents, consider asking them to help with childcare from time to time. This will allow your parents to develop a close bond with your baby, give you some much needed rest and provide coverage of your job.
It’s true that babies are expensive, but if you’re prepared and can make sacrifices for the betterment of your newest family members, I believe you’ll find that they’re so worth it. My two kids are worth every penny.

Realize that everyone’s situation is different, so be sure to speak with a financial professional about your specific situation.

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