How to Financially Prepare for Your New Baby

Financially prepare for your new baby so you can help cushion your family's growth for years to come.

You’re going to be a parent this year! Getting ready for your little one is exciting and amazing, but it also means you have a lot to do to financially prepare for your new baby. Here are some steps you should take to ensure you are ready:

Understand Your Insurance

Babies are expensive, even when you have health insurance, so it’s important to understand your policy and anticipate the costs. You should make a forecast of what you will spend. Make sure to select a pediatrician within your insurance network because you will need one soon after your baby is born. Talk to friends and family to get recommendations. You can also call local clinics and ask to talk to pediatricians to help make your choice. You’ll need to add your child to your health insurance as well. Typically, you have 30 days from your child’s birth date to do so.

Health insurance isn’t the only kind of insurance you should have before baby comes. To financially prepare for your new baby, you may also want to consider life insurance. Unfortunately, tragedies do happen. Even though we don’t like to think about the possibility, it’s important to be prepared. A life insurance policy for a child is generally low cost. Life insurance for you and your significant other should equal at least six to eight times your gross annual salary when you are expecting. A stay-at-home parent should also consider life insurance. 

Plan for Maternity and Paternity Leave

Understand your company’s policies and your state’s laws about maternity and paternity leave to figure out how it will affect your household finances. Know how much time you’ll get off work and whether you’re paid for the time you’re away. When you want to financially prepare for your new baby, limiting money surprises is key.

Draft a Budget that Includes Baby

When your baby comes you will have a lot of new expenses, so plan ahead before the birth. First, cut down credit card debt. High balances in the thousands of dollars will cost you hundreds in annual interest and will make it harder for you to get loans for a larger home or a bigger car. Consider transferring your balance to a credit card with a lower interest rate.

Now you need to create a new budget. Keep track of everything you spend and document everything so you know exactly where your money is going. Finance software can be a big help with this, and free programs online will make creating a budget easy and offer you the ability to track your cash flow.

Your new budget should take into account all your upcoming child-rearing costs. Diapers, food and child care could be recurring expenses for years to come. Make sure to visit day care centers or interview nannies in advance if you know you will require their services. Find out what the costs are to make sure you get quality service at a good price. Child Care Aware ( will put you in touch with a local referral agency for free.

You can enjoy your time with your growing family better when you financially prepare for your new baby.

Start an Emergency Fund

Children are accident-prone and will increase the chances of an emergency situation, so it’s best to anticipate those events by putting money away to pay for any unexpected expenses. A “rainy day” fund with at least three to six months’ worth of salary is a good place to start.

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