All The Financial Sh*t You Have To Do When You Have A Newborn

Leading up to the birth of my first child, I remember having two main things on my mind: the fear of childbirth and dreading sleepless nights. And, let’s be clear — those were both valid concerns. However, along with the feedings and diaper changes to interrupt my sleep, I also found myself lying awake with another sense of dread: realizing just how much money you end up paying for a newborn baby.

A recent BabyCenter survey found that parents can expect to spend $20,384 on baby-related costs in the first year of their kid's life (which, in “no, duh” news, also contributed to 89% of moms saying finances impacted their mental health). It’s a stress I was reminded of all over again as we welcomed our second kid this year.

The cost of bringing a newborn into the world goes far beyond baby gear. You’re looking at things like insurance, hospital bills, college savings, and more. According to the experts, these are the major financial things to plan for when you have a newborn.

Budget for essentials: hospital bills, health insurance, and basic needs

Budgeting for the essentials is key when it comes to not going into sticker shock when your newborn arrives. According to Michelle Paiva of The Finance Therapist, some of the basics worth saving for are "health insurance costs, hospital bills, and a little cushion for unexpected doctor visits." You'll have 30 to 60 days after your child's birth to register them for health insurance during a Special Enrollment Period (because you didn't have enough going on, right?).

From there, diapers, clothing, cribs, car seats, and feeding supplies will make up the core of your first major purchases. "If you can, start a small savings account for your baby’s future — it doesn’t matter if it’s $10 at a time; the habit itself builds confidence."

Paiva recommends saving up for three to six months of basic expenses as a goal. However, if that seems high, something is always better than nothing. "Even $1,000 tucked away can give you breathing room,” she says. “What matters most is not a magic number — it’s having a plan and knowing you can adjust as you go."

All the insurance

Life insurance for yourself and your partner can help protect your family, putting financial resources in place if (knock on wood) anything were to happen to either of you.

Disability insurance is another consideration, as it provides financial support if one or both parents are unable to work due to a severe illness or injury. Depending on your plan, this can help cover essentials like mortgage, childcare, and household expenses for a certain period of time.

Legal stuff: savings account, a trust, updated will

Sophoan Prak, a certified financial planner at Vanguard, shared the importance of estate planning and guardianship when welcoming a newborn to your family.

“Estate planning entails the creation of legal documents to specify your wishes for your assets in the event of your passing or inability to make decisions for yourself,” Prak shares. “It can involve setting up a trust, selecting beneficiaries for retirement accounts and life insurance policies, and how you transfer ownership of your assets. For underage children, it’s crucial to designate a guardian who can raise your child if you’re unable.”

Childcare costs

"Childcare is often the biggest shock, sometimes costing as much as a mortgage,” Paiva explains. I know for my family, having two working parents required finding childcare options early — and I’m likely not the first person to stress how expensive it can be. The cost of our daycare for two kids is not far off from the majority of my salary, something my husband and I had to account for and plan for when deciding whether I should stay at home or not.

College savings

While not all kids may choose to pursue college after high school graduation, it’s never a bad idea to have money set aside for if they do.

"Start investing in your child’s future goals now,” Prak advises. “While school might feel far off, it will be here before you know it. Opening a 529 savings plan, which is a tax-advantaged savings account, can be a great way to get a head start on saving for your child’s education. These accounts offer tax benefits, high contribution limits, easy gifting options, and flexibility — in fact, you can utilize a 529 for K-12 expenses, trade school tuition, college expenses, including room and board, and even for studying abroad.”

Unexpected costs

According to Prak, more than half of parents report spending $1,000 or more annually on unexpected costs. In my personal experience, that number has probably been even higher. From unexpected hospital visits to supplies we didn’t know we needed (who knew an infant could be so picky with a bottle type?), we spent a lot more in our first year than we had planned to.

“Consider saving a minimum of $2,000 or at least half a month of expenses for spending shocks, and 3-6 months’ worth of expenses — if you can swing saving a larger sum — in case of income loss,” Prak recommends.

The hidden cost of convenience

Along with unexpected costs, there’s what Paiva calls the “hidden cost of convenience.”

As for what this is, it includes “...ordering meals or paying for help when you are exhausted,” Paiva explains. “These are not failures; they are part of adapting to life with a newborn. Don't forget that meal planning, accepting dinner from friends and family, and budgeting are all ways to cut food costs.”