How to Afford and Plan for Your Baby

By Amber Miller, CFP®, CSRIC™, Sr. Financial Planner

Last summer, my husband and I had our first child. While I’ve loved the experience, the rumors are true – babies introduce a lot of stressors into our lives, especially when it comes to money. The good news is that with a little forethought, there are steps you can take to prepare for the financial hit that comes with a new baby. The more time you have to plan and save, the better, but even if it’s just nine months, there’s a lot you can do to make life easier as you begin the wonderful adventure called parenting.

Planning and Saving is Self-Care

Planning and saving is an important form of self-care and it’s more important than ever when you’re preparing for your first child. I’m a big believer in targeted savings, and when you’re saving for a baby, that means saving for the different categories of expenses. You also need to think about how your income will be affected. Here are a few ideas to get started.

Planning for Baby Stuff – One & Done

Babies need a lot of equipment, and the cost can add up. Start by making a list of everything you’ll need that’s a one-time purchase like a crib, bassinette, changing table, rocker, etc. Some items can be pricey, so it’s worth considering your options. Maybe they can be shower gifts, or you might find a deal somewhere like Facebook Marketplace, Craigslist or even Goodwill. Research prices for everything on your list and tally it up. Assuming you’re nine months out, divide the total by nine. The number you get is what you need to save every month. If you’re having this conversation before you’re expecting, good for you! Extend the number of months to whatever is a reasonable estimate. There’s no scenario where you can save too much.

Planning for New Monthly Expenses

Our monthly Target bill doubled after our daughter was born, and now includes things like wipes, toys, and clothes. If you’re using disposable diapers that’s a big expense. My husband and I decided to go with cloth, which meant a big upfront cost for the diapers, but now we have a new monthly laundry bill. Once you have a reasonable list, tally up the numbers to see how your monthly costs will change and add that to your current monthly expenses. Compare that to your expected income. If you’re in the red, you’ll either need to increase your income or reduce your expenses. The point is, it’s better to know sooner than be surprised by reality later.

Planning for Time Off

The Family Medical Leave Act requires companies with over 50 employees to offer 12 weeks of unpaid leave when you have a baby. Both women and men qualify, and believe me, you will want every minute of it. Some companies offer some or all the time as paid leave, while others don’t. Find out what the policy is at your company in advance, so you’re not surprised. If it’s unpaid time, do the math to figure out how much you’ll need to save to cover the lost income, divide by the number of months you have until then, and start saving.

Planning for Day Care

If both parents will be returning to work, paying for day care or a nanny will be a big expense. Explore your options – maybe you have an enthusiastic grandparent who’s willing to help one day a week. Be prepared for the possibility that you or your spouse might want to postpone a return to work until the baby’s a few months older. If you have a little extra money saved, you’ll have more flexibility to adapt your plans.

Planning for Health Insurance Changes

I was covered through my employer’s health insurance until we discovered ultrasounds would cost us $300 a piece. I ended up switching to my husband’s insurance. Have a conversation with your health care provider early on to find out what is and isn’t covered. The same applies to covering your baby. If you currently have a high deductible in order to keep your premiums down, that could end up costing you if your child has any health issues when they’re born. Having better coverage when the baby comes might be worth it.

Planning for College

That’s right, your baby isn’t even born yet, and I’m talking about saving for college. Technically, you can’t open a 529 College Savings plan until your child has a social security number, but if you get one set up as soon as possible, steering gifts from family and friends into it is a great way to jumpstart college savings. This is an area where I recommend connecting with a financial planner to maximize tax savings.

Planning Feels Great

Babies are a gift, but they don’t come free. By thinking through the financial impact your new baby will have on your family, you can plan for it, which means one less thing to worry about later, and more time to enjoy your baby.

If you’d like to know more about how to prepare financially for your future family or the one you already have, give us a call at The Planning Center. We’re ready to help reduce your stress by preparing for your best future.


Michelle MatonAmber Miller, CFP®, CSRIC™, is a Senior Financial Planner in the Twin Cities office of The Planning Center, a fee-only financial planning and wealth management firm. Email her at amber@theplanningcenter.com.