Budgeting for New Parents: How to Build a Baby Budget

Becoming a parent is exciting. And overwhelming. And expensive. Your life is about to change dramatically, and so will your bank account. But don’t panic. It’s not as scary as it may feel right now. While your newborn won’t come with an instruction manual, the keys to budgeting for parenthood can be broken down into equal parts preparedness and flexibility. Check out these tips to help you build a realistic budget for your growing family.

Start planning early

While money may not be the first thing on your mind early in your pregnancy, it should be a priority. Babies are expensive. In fact, according to New York Life, the cost of a newborn’s first year of life can range from $20,000 to $50,000, so it’s best to start planning (and saving) as soon as possible.

 Carve out some time to sit with your partner to discuss your current financial situation. Determine your combined monthly income and expenses pre-baby and then create a list of expenses for when your baby is born. If this is your first child, you may be surprised by how long the list will get. In addition to one-time expenses like the crib, the stroller, and the changing table, you’ll also need to budget for diapers, wipes, clothing, food, and formula. To help save your wallet from going into shock, consider putting some of your monthly discretionary money into a savings account. You’ll thank yourself later.

Determine financial priorities

After learning about your money and forecasting how your lifestyle will change, you and your partner should consider discussing your combined financial goals as well. New parents often feel immediate pressure to start saving for their child’s education, and while that’s important, it shouldn’t come at the cost of your current and future financial security.

Discuss financial priorities you can work toward now. Maybe you have student loan debt or would like to buy a home and continue to grow your family. You might be thinking about building a nest egg for retirement, investing, or establishing a healthy emergency fund. Whatever your financial priorities are, make sure to include them in your budget. This will give you the best idea of what your finances truly look like.

Practice living on less

The bottom line is that saving money is the most important part of preparing for your baby budget. You can start saving before the baby’s arrival by subtracting your estimated baby expenses from your current budget. If you expect to spend an additional $1,250 per month after the baby, put $1,250 away for the duration of your pregnancy. You could have just over $11,000 saved by the time the baby arrives. If you or your partner have to take unpaid maternity or paternity leave, you’ll have to prepare for weeks of living on one income. So, it’s never a bad idea to practice living below your means.

Find additional ways to save

Even after your baby is born (congratulations, by the way!), you can still find ways to save. Babies grow quickly, so consider shopping for baby clothes at quality consignment stores or accepting gently used hand-me-downs. And no one tells you how expensive child care services are either. According to CNBC, in 2022, annual child care costs are expected to exceed $10,000. If you have the support, reach out to close friends or family to see if they’d be willing to babysit a few times a week. Lastly, tap into your mommy network if you have one. Borrowing big-ticket items like a rocking chair or baby monitor can help cut costs even further.

Growing your family doesn’t have to mean going broke. With proactive financial planning, you can prepare yourself to manage all the new costs associated with raising a baby. Your only real worry should be finding time to get a decent nap!