Money Management

How to Prepare Financially for a Baby: 9 Smart Money Moves to Make Before & After

How to Prepare Financially for a Baby
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Whether you’re eagerly awaiting the arrival of your little one or you’ve already welcomed them into the world, it’s important to consider how your new addition will affect your finances.

Don’t fret, though – we’ve covered you with these nine money-saving tips.

#1. Get Life Insurance

It’s easy to put off thinking about life insurance, but now is the time to act. With the world more unpredictable than ever, protecting your loved ones is important if something happens to you.

Fortunately, buying life insurance is now quick and easy. With Ladder Life, you can purchase up to $3 million in coverage without a medical exam.

Their coverage calculator makes it easy to determine the right amount of coverage for your family’s needs, and you can adjust your coverage at any time.

The application process is simple and straightforward – it only takes about five minutes to answer questions about your health and life.

You’ll get an instant quote for coverage, so you can see exactly how much you’ll be paying. And with Ladder Life’s policies having no fees and coming with a 30-day money-back guarantee, there’s no risk to applying.

The earlier you buy life insurance, the less you’ll pay. That’s why it’s important to act now to secure the best rates and give your family the peace of mind they deserve.

Get Started.

#2. Shop Smart

Whether you’re expecting a new baby or already have little ones at home, there are always essentials to purchase, from strollers and cribs to diapers and clothes.

Capital One Shopping makes it easy for parents to save money on all these necessities.

Add the browser extension, and during checkout, Capital One Shopping searches the internet for coupon codes to help you save money. Plus, at 25+ major retailers, a friendly pop-up will notify you if the item you’re purchasing is available at a lower price elsewhere.

Get it now and unlock a world of savings.

Download Capital One Shopping.

#3. Payoff High-Interest Credit Card Debt

As a parent, taking control of your credit card debt offers numerous benefits, such as reduced stress, enhanced financial security, and an increased ability to save.

Moreover, it can help improve your credit score, putting you in a better position to buy a home for your growing family in the future.

Tackling debt might seem daunting, especially when credit card companies profit immensely from high-interest rates. However, there is a solution.

Introducing Fiona, the platform designed to help you overcome high-interest debt as quickly as tomorrow.

Here’s how it works: Fiona matches you with a low-interest loan to pay off all your credit card balances. The advantage? You’ll have just one monthly bill, and with the significantly lower interest rate, you can become debt-free much more rapidly. Plus, there’s no need for a credit card payment this month.

If your credit score is at least 620, Fiona can assist you in borrowing up to $250,000 (no collateral required) with fixed rates starting at 5.99% and terms ranging from 6 to 144 months.

Fiona eliminates the need to wait in line or contact a bank. Furthermore, checking online for eligibility is free and takes only two minutes, potentially saving you thousands of dollars.

All that credit card debt—and the stress accompanying it—could be gone by tomorrow, allowing you to focus on the benefits of improved financial health as a parent.

Visit Fiona.

#4. Build Your Emergency Fund

Are you familiar with the concept of an emergency fund? If not, it’s simply a savings account set aside for those unexpected expenses that come up in life. 

To ensure you’re fully prepared, we recommend saving at least three to six months of expenses in a high-yield savings account separate from your checking account. 

And don’t stress: building an emergency fund doesn’t have to happen overnight. Think of it as a goal to work towards over time. 

The good news is that with interest rates on the rise, you can now earn meaningful interest on your savings. To ensure you get the best deal on your emergency fund savings account, use our tool to compare the top savings accounts.

#5. Create A Budget

Creating a budget is an essential step in preparing for parenthood. With a little bit of planning and flexibility, you can budget for your new expenses and still have some extra cash for savings.

First things first: you need to track your spending at a glance to understand your trends and find ways to save money. 

One app I love for budgeting is Rocket Money. Not only does it help you cut unnecessary subscriptions and save money, but it also allows you to track your expenses for free.

When analyzing your budget, use the 50/30/20 approach. This means that 50% of your income should go towards household bills, minimum loan payments, and expenses like child care, diapers and formula; 30% should go towards financial wants; and 20% towards savings and payments on high-interest debt.

Keep in mind, that split is just a goal, and you may find that your needs take up more than 50% of your income. But the point is that you’re tracking your spending and aiming for improvement.

Want to give Rocket Money a try? Download the budgeting app now and start saving money!

#6. Budget for Labor and Delivery

If you have health insurance, expect to pay about $2,500 for labor and delivery costs.

That’s a big bill, but it’s the reality of having a baby. 

Keep in mind, this is just an average. Your bill could be more or less depending on your insurance and the type of delivery you choose.

To get a better idea of what you’ll actually pay out of pocket, it’s important to contact your health insurance provider. 

Tell them where you plan to have the baby (e.g., at the hospital) and how you plan to have the baby (e.g., naturally, with an epidural, etc.). Have them estimate your out-of-pocket costs and ask about what scenarios your insurance would not cover. 

For example, how much would a cesarean section cost compared to an epidural? Is there a limit on the number of days you can stay at the hospital?

Another thing to keep in mind is that most hospitals consider both the mother and the newborn as patients. This means that they may be subject to separate deductibles.

Overall, don’t let the cost scare you. Hospitals want to get paid, and they understand that most people can’t pay $2,500 out of pocket.

In most cases, they’ll work with you to set up a payment plan. You may even be able to extend the payments out for a year or two, breaking the cost down to a more manageable monthly bill. 

If you’re in need of financial assistance, there are options available for those with a low income, those who currently have no insurance, or those who are on Medicaid. See here for more information. 

#7. Add the Baby to Your Health Insurance

One of the biggest expenses you’ll have to consider is health insurance. Once your child is born, you’ll need to add them to your health insurance plan, which can be a shock to the budget.

I ran a quote for health insurance on the ACA marketplace for a non-smoking couple in their 30s and found that the cost for an unsubsidized plan is $837.70 a month. But once I added a newborn to that plan, the cost jumped to $1,099.78 a month. That’s an increase of over $250 a month!

The good news is that in an ideal world, part of this cost increase will be paid for by your employer. So, be sure to ask HR what the cost will be for adding a baby to your plan, and adjust your budget accordingly. 

If you’re purchasing health insurance through the marketplace, a family of three can qualify for a subsidy as long as their income falls below a certain threshold. You can use the calculator at to see what your monthly costs would be based on your income.

Don’t forget, in the marketplace, having a baby makes you eligible for a special enrollment period, so you don’t have to wait until open enrollment to change plans. 

Don’t let the cost of adding a baby to your health insurance plan catch you off guard. Take the time to research your options and find the best plan for your family.

#8. Rework Your Budget

There are many ongoing expenses related to taking care of your baby during their first year of life. 

On the lower end of the scale, when I use Baby Center’s first-year expense calculator, a family with no child care expenses who breastfeeds will face estimated first-year costs totaling $6,317 after accounting for baby clothing ($30 per month), food ($30 per month starting at six months), diapers, medicine, toiletries and wipes, and a toys/books ($20 per month).

These ongoing costs (like most things) can vary widely, especially if childcare is in the equation. 

For example, after our third child was born we decided to ditch our sedan and become the proud owners of a minivan. Similarly, after our first child was born, our monthly costs increased significantly as we moved out of an affordable one-bedroom apartment and into a more expensive two-bedroom space. 

While the first month or two is likely going to be a whirlwind, it’s at this stage where it’s important to not forget to revisit and rework your budget. 

#9. Consider a 529 Account

Are you looking for a way to save for your child’s college education? Look no further than a 529 college savings plan. 

Depending on where you live, you may even be eligible for a tax deduction when you make a contribution. Plus, your earnings grow tax-free and can be withdrawn tax-free if used for qualified education expenses.

But here’s the real question: is a 529 plan the best option for you and your savings goals? In my opinion, it’s not at the top of my priority list. Why? Because you can borrow for college, but you can’t borrow for retirement. I personally prioritize maxing out my retirement accounts before fully funding my kids’ 529s.

Instead, I’ve set up an automatic transfer of $50 per month into our state’s 529 plan for each of my children. This is not enough to cover the full cost of a four-year, in-state degree, but it’s a start. 

Another option is to ask for friends and family to contribute to your child’s education fund by setting up an account with Backer, instead of the more traditional baby shower or gifts after the baby is born.

Ultimately, the choice is yours. If the money isn’t there, don’t beat yourself up. You’re not a bad parent for choosing to pay off debt or fund your 401(K) over a 529 plan.

How to Prepare for a Baby: Final Thoughts

Succeeding as a new parent financially is all about developing a realistic framework for what lies ahead, and then doing what you have to do to get through this week, this month, and this year.

After all, our parents didn’t have it all figured out when they had us. 

It’s not always easy. But wow… is it worth it. 


*Capital One Shopping compensates us when you sign up for the service using the links provided.

R.J. Weiss
R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner™, husband and father of three. He's spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.

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