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The 7 Steps of Preparing Financially for a Baby

If you are an expectant parent, you’re likely feeling all kinds of emotions — excitement for this new journey, anticipation for your bundle of joy, anxiousness over your preparation, and more.

One of the most common emotions, however, is worry — specifically, worry over finances. All expectant parents wonder how to prepare for a baby financially. If you are facing an unplanned pregnancy, these worries are likely amplified. After all, you had no plans to have a baby at this time in your life, which means you may not have the means of financially preparing for a baby due to your career, work or other personal situations.

However, if you have decided to become a parent and raise a baby, it’s important that you start preparing for a baby financially as soon as possible. By recognizing your financial situation and the areas you need to expand for your new addition, you can take the necessary steps to giving your child the life you want them to have.

7 Important Steps of Financial Preparation for a Baby

1. Understand your health insurance plan.

If you are pregnant, it’s important that you start receiving prenatal care as soon as possible. However, the costs of prenatal care (not to mention delivery and a hospital stay) can be extensive. Before you choose any healthcare providers, make sure you understand exactly what your health insurance covers. You may be required to choose providers within your plan to obtain the coverage you need.

If you have insurance through work, speak with your HR department for more details about your plan. If you do not yet have insurance, consider signing up for a health insurance policy or applying for Medicaid.

2. Create a budget.

Raising a child is expensive, so it’s important that you understand the costs of preparing for a baby and raising them to age 18. If you do not already have one, you should create a budget.

A budget takes into account your current income and compares it to your expenses. Know that it costs about $1,080 per month to raise a child, for an annual cost of $13,000. When you create your budget, include these expenses in your monthly costs and evaluate whether your current income can support that. You may need to readjust your discretionary spending (like eating out and entertainment) to afford your child. The earlier you create a budget and start adhering to it (even before your baby is born), the better financial shape you will be in.

3. Plan for your maternity or paternity leave.

Many employers have policies on maternal or paternal leave after a baby is added to the family, but not all of them offer paid leave. Understanding your employer’s leave policies is a key part of preparing financially for a baby. If you will lose income during your maternity leave, consider how you will make it up. Evaluate how much unpaid leave you can realistically take and still afford the costs of your newborn baby.

4. Think about college savings.

When you are wondering how to get financially ready for a baby, you’re probably only thinking about the short-term: your hospital stay, the expenses of a newborn baby, childcare and more. However, it’s equally important to take into account your child’s future — more specifically, their college fund.

When you become a parent, you will need to ask yourself what kind of financial support you will provide for your child’s higher education. Keep in mind that current trends make it near impossible for students to afford college on their own without massive debt. If you wish to start a college fund for your child, talk with a financial advisor to understand what options are available to you and how much money you will need to put aside each month.

5. Create or add to your emergency savings account.

When you add a newborn to your family, you will experience some unexpected costs — like doctor’s visits and childcare. Therefore, it’s crucial to have a substantial savings account to financially prepare for a baby. In general, financial advisors suggest a savings account include at least six months’ salary to prepare your family for any unexpected developments.

If you can’t afford to put at least 10 percent of each month’s income into a savings account, start small. It’s always better to have something than nothing.

6. Consider buying second-hand or asking your community for supplies.

The list of things you need to prepare for your baby’s arrival can be substantial. But, not all of these supplies have to be bought new. Odds are, your friends and family will have old baby supplies lying around, and they will be happy to give them to you. You may also consider shopping at thrift stores for baby clothes or connecting with other parents in support groups. Choosing to use reusable cloth diapers can also help in preparing for a baby financially.

7. Take advantage of federal financial aid.

Finally, if you are preparing for a baby on a budget, don’t be afraid to utilize the government resources available to you. Programs like Medicaid, the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), and SNAP and TANF can provide federal assistance for low-income families. Check out for guidance on what programs you may be eligible for.

What if You Cannot Afford the Costs?

An important part of how to financially prepare for a baby is being realistic about your financial situation. If you are not financially ready to raise a child, you do have options. Before choosing to be a low-income parent, think about whether this is the life you really want your child to have.

If you believe you can improve your financial situation in a short period of time, you may consider a temporary guardianship. This path allows you to place your child with a relative or friend who can help provide for your newborn, while you complete your schooling, get a new job and improve your overall situation. You will retain your parental rights and, when you are ready, your child will be returned to your custody. While you will still be legally required to provide financial support for your child, placing him or her with a relative who is more financially prepared can help provide them other opportunities you can’t at this point in time.

While financial concerns alone should not prevent you from parenting if that’s what you want to do, another option is always placing your child for adoption. If the cost of preparing for a baby and raising a child is too much at this time in your life, you might choose to place your baby with a family who is financially prepared for a child and can provide him or her all the opportunities you cannot. Adoption is always free to a woman considering this path, and she may be eligible for financial assistance for her living expenses as well. With adoption, your parental rights will be terminated, but you can maintain a relationship with your child through open adoption.

If you are wondering how to get financially ready for a baby, we encourage you to contact a financial advisor or a pregnancy counselor to learn more about the costs ahead of you and the resources you may take advantage of.