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How to Financially Prepare for a Baby: Tips for Expecting Parents

Guest Blogger October 23, 2015

By Nat Sillin

Ask anyone with children, and they’ll tell you that raising a child is expensive.

By some estimates, the cost totals more than $300,000 over the course of 18 years, not including college. Perhaps that’s why, for adults under 50 who don’t have children, 36% say that money is the main reason.

For those who are expecting, the expenses can be frightening — childcare, food, housing, tuition and more. But remember, there are parents who make it work every day.

How can you make the financial side of parenting more manageable? With smart planning, new parents can reduce some of their major expenses and reduce their financial stress.

Evaluate your finances

As early as possible, take a look at where your finances stand. Even if you’re just discussing marriage and parenthood, or considering having a baby in the future, it’s a good idea to look at the numbers and see what might need to shift.

If you’re planning to raise a child alone, adopt, or pursue fertility treatments, each of these options will impact the financial side of your journey, too, and should be considered when budgeting, planning and setting financial goals.

Whatever your situation, take inventory of the following aspects of your financial life to see where you’re well-prepared and what might need improvements:

  • Income
  • Housing
  • Emergency savings
  • Unpaid debt with high interest (such as credit cards)
  • Savings for childbirth and maternity/paternity leave 
  • Retirement and other long-term savings

Get expert financial advice

Many parents feel like they have to figure everything out on their own. But the truth is, you don’t have to go it alone, even when it comes to dealing with finances.

Before embarking on this major change, get in touch with financial professionals who can help you implement key strategies for parenthood. This can include:

  • Certified credit counselor: An NFCC-certified credit counselor can help review your budget and offer personalized advice on how to save more.
  • Tax advisor: Get information on how to save for childbirth while reducing your taxes, leave assets to your child, claim tax credits, and more.

You can also use the IRS’s tax information for parents to help with overall planning. 

Check your job benefits

If you’re employed, there’s a chance you have some valuable benefits that offset the costs of childcare, parental leave or childbirth. For example, in 2024, around 60% of employers offered some form of parental leave and maternity leave.

As an employee preparing for parenthood, it’s worth knowing exactly what’s available to you and how to take full advantage. Your benefits might include:

  • Paid maternity/paternity leave
  • Specialized fertility benefits
  • Remote work opportunities
  • Childcare support
  • Insurance for dependents
  • A Flexible Spending Account (FSA)

Start planning for childcare costs

Full-time and part-time childcare services can be surprisingly expensive. The cost is now estimated to be roughly $13,000 to $18,000 per year. That’s a range of $1,083 to $1,500 per month. 

One way to bring down the cost is to start exploring your childcare options well before your child arrives. You can also ask a qualified tax advisor about paying childcare expenses from your Flexible Spending Account (more on this below), if your employer provides one.

Talk to loved ones about financial help

As the proverb goes, “It takes a whole village to raise a child.” 

Before your child arrives, try not to assume that loved ones will (or will not) provide you with specific support. Instead, have honest discussions about your plans, and ask friends and family if they’re open to being involved. 

There are several ways a loved one can help ease your financial burden, including:

  • Financial assistance
  • Providing childcare or babysitting
  • Covering medical expenses or other specific costs
  • Sharing hand-me-down clothing, toys, furniture or other necessities
  • Recommending resources

For friends and family members who want to make an additional commitment, they might also contribute to a Coverdell Education Savings Account, 529 college savings plan or make other strategic gifts. 

Plan for childbirth and medical expenses

Depending on your insurance, childbirth can come with a major price tag. For people with insurance, it currently costs around $2,900 out-of-pocket, just to have a baby, though cesarean sections are closer to $3,200.

So before your delivery date comes, take some time to understand the out-of-pocket costs you will incur for labor, delivery and aftercare. Ask about coverage for high-risk pregnancies or deliveries. If applicable, look into the price of fertility and any child-specific procedures or treatments, too. 

One way to manage and budget for these costs is to put money into a special savings account that can be used for medical expenses. Consider these options:

  • Health Savings Account (HSA): Available for people who have high-deductible health plans (HDHPs). Your contributions earn interest, and any money you don’t spend rolls over from year-to-year.
  • Flexible spending accounts (FSAs): Usually provided by employers. When the new benefit year begins, or if you switch jobs, you can lose the money that’s in the account.

With both HSAs and FSAs, the money you deposit is not taxed, so your contributions help you reduce your income taxes. To learn more about how much you can contribute and the tax implications, talk to a tax advisor.

Nathaniel Sillin directs Visa’s financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney
This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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