Budgeting for a New Baby: Ongoing and One-Time Expenses

Having a new baby is super exciting, but it can also be a bit tricky when it comes to money. Babies may be small, but they can bring big changes and cost a lot of money for new parents. Wondering how much cash you’ll need for your baby’s first year and what money stuff you should do? We’ll help you get ready for your new family member from a financial standpoint before they come.

KEY TAKEAWAYS

New parents often spend a lot of money when they have a baby. The biggest cost is usually the hospital bill for having the baby, which can vary based on where you live and your health insurance.
There are also one-time expenses like travel, buying things for your home, and getting things for feeding and taking care of the baby.
You should also think about how much it costs to have someone look after your baby while you work, and saving money for the future.
It’s a good idea to have some extra money saved in case one parent decides to stay home and not work for a while.

One-Time Expenses

In this case, we look at the first baby. we’re talking about babies. That means starting from scratch in many areas such as furniture, strollers, and cribs. There is, of course, also the one-time medical expense of delivering a baby in the United States. As we’ll see, this expense is by far the hardest to pin down in any meaningful way.

Medical Bills

In the U.S., the average new parent with insurance coverage can expect to pay almost $14,000 for their labor and delivery, according to a 2020 research article published by the Healthcare Cost Institute. Vaginal deliveries can cost from $7,000 in Arkansas to $17,000 in New York. Interestingly, out-of-pocket costs also exhibited a wide range, from $1,000 in D.C. to $2,400 in South Carolina. (2017 was the most recent year for which data was available.)

It’s really important to remember that the price of having a baby can be very different depending on which hospital and where you live and what kind of health insurance you have. You should check your insurance plan to see how much money you’ll need to pay for things like check-ups before the baby is born, the time you spend in the hospital when the baby is born, any tests you need, and care after the baby is born. Unfortunately, it’s pretty hard to guess how much it will cost without looking at your insurance.

So, your insurance plan and where you live are the big things that decide how much having a baby will cost you.

Baby Stuff

The things you buy for your baby can cost a lot, and it really depends on what the parents want. So, the cost in this category can get much higher if parents have specific things they really want to buy.

Travel Needs

If you want to go outside with your baby, you’ll probably need to buy a stroller, a car seat for babies (required by law), a baby carrier, and a bag for carrying diapers and baby stuff. If you’re going to be out a lot, it might also make sense to get a foldable playpen or a small bed for your baby to sleep in when you’re not at home. These things are costly different amounts, so you have options to choose from.

Buying an adapter, snuggle bags, and another option for some brands of strollers can be a $1,000 price tag without taking in the cost of the stroller itself. On the other end of that range, a seat and stroller combo can still be purchased new for under $150, and used equipment or hand-me-downs can fill in for all the others. It is worth noting that, at the very least, it is worth buying a new infant car seat. There is no foolproof way to ensure that a used one hasn’t been compromised in a previous accident or through hard use.

Home Needs

To keep your baby busy and comfortable, you might want to think about getting a swing, a bouncy seat, a soft play mat, or a jump seat. You could also consider having a crib or a small baby bed, a comfy mattress for it, basic bedding like blankets, a place to change diapers, a little dresser, a rocking chair, a baby monitor, and a special trash can for diapers. The cost here really depends on what you like. Unlike car seats, all of these things are for use at home, so you can buy them secondhand or trade with other parents online.

Nursing and Feeding

The cost of feeding your new baby can be different for everyone, depending on your own situation. If one parent can stay home and breastfeed the baby without any problems, you might not need to spend much money for several months until you need a high chair and baby dishes. In this case, things like a breastfeeding pillow, burp cloths, and maybe a cover-up are all you’ll really need.

“If the parent plans to save breast milk for later, then you’ll need things like bottles, nipples, stuff to clean them, and either a single or double breast pump. This will make your budget go up. But if breastfeeding isn’t an option, using formula to feed your baby will cost more during the first year of being a parent.”

Ongoing Expenses

Once your baby arrives, the regular expenses to care for your little one kick in. Factor the following costs into your budget.

Child Care

If both you and your spouse plan to go back to work after your baby is born, the biggest thing you’ll need to budget for is child care. How much you’ll pay for child care can be different depending on where you live, how old your baby is, how much care you need, and what type of care you choose. On average, sending your child to a daycare center can cost you nearly $10,000 per year. If you prefer to have a nanny or someone come to your home to take care of your baby, it might cost around $28,350 a year, but this can also vary depending on where you live.

Keep in mind that you might be able to get some money back through tax credits, like the child and dependent care credit. Make sure to check if you qualify for these credits.

Food and Other Necessities

“Most of the ongoing costs for your baby will go into things like food (like Gerber formula), clothes, and diapers. When you start giving your child solid food, you’ll probably spend around $100 a month on it. But it’s important to know that the costs for feeding and taking care of a baby are much smaller compared to what you’ll spend when they become a teenager.”

Clothing and Diapers

“According to a recent report from the USDA about the cost of raising a child, new parents should plan to spend somewhere between $670 and $1,110 on clothes during the first two years of their baby’s life. The actual amount can be quite different depending on your personal choices and budget, but on the lower end, it’s roughly around $56 a month.

When it comes to diapers, the cost can vary as well, but experts suggest setting aside at least $1,000 for diapers and $450 for wipes for just the first year. That’s roughly $120 a month. If you’re using disposable diapers, be prepared to use as many as 3,500 diapers in your baby’s first year alone.”

More Medical Bills

“During your baby first year, you should expect to have six wellness check-ups for things like health evaluations and vaccinations, as well as a few extra visits if your baby gets sick. Make sure to look at your health insurance policy to see what the costs will be for these visits.”

If One Parent Stays at Home

“If one of you decides to stay at home and take care of the baby, there are some important money changes to think about. The first thing is that your family will have less money coming in because one person won’t be working. Even though child care can be expensive, the financial impact of one parent not working can be even bigger because you’ll miss out on income, benefits, and opportunities to save or invest.”

According to the Family Medical Leave Act (FMLA) some employers might allow you to take up to 12 weeks off from work when your baby arrives, but it’s important to know that not all businesses have to follow these rules, especially small ones. So, it’s a good idea to find out what kind of leave your employer offers. If you do take unpaid time off, you should figure out how you’ll cover your usual expenses during that time, like your utility bills, insurance, kitchen stuff, and so on.

Financial Tools to Consider

When your child arrives, it’s very important to set up some financial plans to make sure you can take care of their future needs. First figure out what is most important for your family, then start making a budget to manage your money strictly.

College Savings Tools

In the 2021-2022 school year the College Board found that the average yearly cost for college varied from $10,740 if you attended a public four year in state school to $38,070 for a private four year education. To prepare for these costs it’s a good idea to start saving now using college savings tools like a 529 plan, Education Savings Account, or UGMA/UTMA account.

Some rules for certain accounts, like the 529 plan, have changed. Thanks to the Tax Cuts and Jobs Act (TCJA) of 2017 and the Setting Every Community Up for Retirement Enhancement Act (SECURE) of 2019, you can now use 529 plans for things like K-12 education expenses apprenticeship programs, and even to help pay off student loans.

The SECURE Act 2.0, passed in January 2023, offers another newly expanded benefit for 529 plans. It allows beneficiaries of these plans to roll over up to $35,000 from any 529 accounts in their name to a Roth IRA in their name over the course of their lifetimes.13

Life Insurance

“If you don’t already have life insurance, it’s a good idea to consider getting it if it fits your budget. For a small monthly cost, you can make sure that if something unexpected were to happen to you or your partner, your child would have some financial support. You can discuss life insurance and disability insurance options with your employer or an insurance agent.”

Health Insurance

“Not having health insurance is risky because even one major accident or illness could use up all your savings and leave you with a lot of debt. If you don’t have health insurance for your child, it’s important to look into your options or plan for the extra cost of adding them to your current policy by budgeting for a higher monthly premium.”

Flexible Spending Accounts (FSAs)

“You can save money on important family expenses like child care and healthcare by using Flexible Spending Accounts (FSAs), which let you use money before taxes are taken out. To set up a dependent-care FSA or healthcare FSA, have a chat with your employer or a financial advisor.”

Ways to Save Money

No matter your income, however, there are numerous ways to meet your new baby’s needs without breaking the bank that we’ve hinted at throughout. Namely:

“Consider shopping at secondhand stores: Babies grow fast, so you can find baby clothes and items that are still in good condition at consignment or thrift stores. Some of these stores may even buy back items your baby has outgrown. You can also look online for groups where parents swap or give away baby stuff.”
“Ask family or friends for help with childcare: If your child gets sick and you can’t take a day off from work, see if a family member or friend can look after them as a backup plan.”
“Ask friends who have babies if you can borrow things from them, especially expensive items like cribs, high chairs, or rocking chairs that they’re not using.”
“When you have a baby shower make a list of things you need so that your guests can buy useful gifts for you. This way you won’t end up with lots of duplicate baby items like rattles and photo albums.”
Adjust your lifestyle: When you have a baby your finances might need some adjustments. If your budget doesn’t quite work think about making some changes. For instance, you could trade your expensive car for a more affordable one, shop at cheaper stores, or buy generic products instead of brand names.

The Bottom Line

Adjust your lifestyle: When you have a baby your finances might need some adjustments. If your budget doesn’t quite work think about making some changes. For instance, you could trade your expensive car for a more affordable one, shop at cheaper stores, or buy generic products instead of brand names.”Kids are a great blessing, even though they can be costly at times. The important thing to remember is that average costs don’t tell the whole story when it comes to what you might spend on a baby. Having good health insurance can cover a lot of the hospital costs, but you’ll need to plan and budget for the rest. In some places, like Finland, they give new parents a basic box that can also be used as a baby bed, which shows that a lot of the money we spend on our kids in their early years is more about showing off than really taking care of them.”