New Parent's Guide to Financially Preparing for a Baby

Preparing for a baby involves making major financial decisions, from budgeting for health care and delivery to planning for future child care expenses. A key first step is to have an open and honest discussion to clarify your financial standing. This insight helps set a foundation for understanding what you can afford — whether it's delivery options, immediate baby needs or future expenses — so that you're prepared to support your baby's early needs and long-term growth.

Before your baby arrives, taking proactive steps like reviewing finances, preparing for medical costs and organizing parental leave can help reduce financial stress. Below are some financial steps to consider as part of your pre-delivery planning.

A money talk is an open, honest discussion about finances that becomes essential when preparing for a new baby, as it lays the groundwork for managing upcoming financial responsibilities. Ideally with all partners involved, this conversation informs key financial decisions and covers important areas like income, savings, insurance, debt and expenses. When preparing for a baby, be sure to discuss the following:

Health insurance can be a valuable support to help manage baby-related expenses, which can add up quickly. Under the Affordable Care Act (ACA), maternity care and childbirth are classified as essential health benefits, meaning ACA health insurance providers cannot deny you coverage due to pregnancy. However, coverage levels vary, so even with insurance, you may still owe a significant amount for prenatal care and delivery.

Review your current health insurance policy to understand what's covered, especially for prenatal care, delivery and newborn care. This review helps identify gaps in coverage that may need adjustments to ensure key expenses remain manageable.

If you're considering new insurance, shop around and compare rates to find the best pregnancy coverage for your growing family. Find plans that cover extra services, such as lactation consultant visits, which can further support new parents. If your hospital bill is higher than expected, request an itemized bill to review each expense, and remember that you have the right to dispute any charges that seem incorrect.

Creating a baby budget starts with identifying financial priorities and understanding the types of expenses you'll face. Begin by distinguishing between one-time expenses, like baby gear and hospital costs and ongoing expenses, such as diapers, formula and child care. Consider any potential changes to your household income, especially if one parent may take time off work.

Create a small buffer in your budget for unexpected expenses, such as medical needs or additional baby supplies. Use a budgeting tool or app to track each category of expenses as they arise. This can help you adjust your budget as necessary, stay within spending limits and prepare for unexpected costs.

Preparing for delivery involves planning for both the timing and method, as these choices can significantly impact costs. Whether opting for a natural birth or a C-section, consult with your doctor to understand the best delivery method for you and the associated expenses. Afterward, choosing a hospital and pediatrician within your insurance network can help you avoid out-of-network charges, keeping costs manageable for both the delivery and your baby's follow-up care. Ensure that all health care providers are covered under your insurance to prevent unexpected bills and additional expenses.

Paying down existing debt before your baby arrives can help you reduce your financial burden and free up resources for new baby expenses. This is especially important for high-interest debt, like credit card debt, which can quickly accumulate and impact your monthly budget. Aim to pay at least the minimum balance on time each billing period to protect your credit score.

If you're able to pay down some or all of your debt before the baby comes, that's a strong step forward! To stay on track, consider these points:

• Keep a safety net and avoid draining your emergency savings to pay down debt.
• Don't take on new debt to pay off existing balances.
• Prioritize essential family needs, like food, housing and medical care, over debt payments.
• Consider a debt repayment method that fits your financial situation and keeps you motivated, such as the avalanche method (targeting the highest-interest debt first) or the snowball method (paying off smaller balances for a quicker sense of progress).
• Aim to pay at least the minimum balance on time each billing period to protect your credit score.

As new parents, unexpected costs can range from unplanned medical expenses for both birthing parent and baby to last-minute baby supplies or adjustments in living arrangements. A well-stocked emergency fund helps cover these costs without disrupting your family’s budget, especially if one parent plans to take unpaid leave or reduce work hours.

Ideally, aim to save three to six months' worth of living expenses, with a focus on any new costs associated with caring for a baby. If you already have an emergency fund, consider increasing it to cover the added demands of parenthood. Using windfall money — like bonuses, tax refunds or gifts — can help you quickly build a cushion, giving you the confidence to handle the unexpected without resorting to high-interest borrowing.

Planning for parental leave involves understanding your workplace's leave policies and any benefits available to manage finances during time away. Start by reviewing your company's policy, including details on paid or unpaid leave and any specific requirements. If part of your leave will be unpaid, consider budgeting for reduced income and strategically using paid time off (PTO) to help bridge any income gaps.

If your employer doesn't offer paid leave, consider options such as the Family and Medical Leave Act (FMLA), which offers qualified employees up to 12 weeks of unpaid, job-protected leave. Since not all expectant parents qualify for FMLA, confirm your eligibility before your baby's arrival. If you don't qualify, consider combining sick days, vacation days or short-term disability insurance, if available, to help cover income during leave. Some states also offer paid family leave programs with partial wage replacement, so check for any state benefits that may apply.

The first days after your baby's birth involve a few important administrative tasks. These tasks set up your baby's official records and ensure timely access to health care and benefits.

You’ll usually receive a birth certificate form to complete in the hospital. Hand it to the nurse before discharge to prevent delays or extra fees. If you're having a home birth, check with your midwife or birth attendant for these forms. If they're unavailable, your pediatrician can help during your newborn's first checkup in the days following birth.

You can also apply for your baby's Social Security number at the hospital. If you miss this step, you'll need to wait until you have the birth certificate to verify your child's age. A Social Security Number is required to claim tax credits, open a bank account for your child or access government services.

If you plan to travel internationally to introduce your newborn to relatives, keep in mind that a passport is required. Passport processing can take up to six weeks, and you'll need the birth certificate to apply. Allow sufficient time for these applications or prepare to pay extra fees to expedite both the birth certificate and passport if needed.

The first weeks after birth involve necessary updates to secure your child's well-being and family's future. Parents need to promptly add their child to health and life insurance policies to ensure comprehensive coverage while also considering child care options that fit both family needs and budget.

Within the first few weeks after your child is born, add them to your health and life insurance plans to secure medical coverage and future financial protection. For health insurance, enroll your baby within 60 days to avoid coverage gaps. Update your life insurance by adding your child as a beneficiary, and consider additional options, like a disability income rider, if needed. You may also want to adjust your coverage to align with your family’s evolving needs, such as increasing life insurance to cover future education expenses or adding supplemental health insurance for high out-of-pocket costs.

If you have employer-provided benefits, contact your HR department to complete the paperwork for adding your child. Arrange a policy review with HR or your insurance agent to ensure that all updates are processed accurately and that your coverage meets your growing family’s needs.

Planning for child care early helps ensure a smooth transition back to work while fitting within your family's budget. Start by exploring various child care options, such as daycare centers, in-home care providers or support from family members, to determine the best match for your needs, preferences and financial situation. Evaluate factors like location, availability, staff qualifications and hours that align with your work schedule. Additionally, consider any specific requirements your child may have, like dietary needs or developmental support, to make sure the care arrangement is well-suited to their well-being.

As life begins to settle, the months following your baby's arrival are an ideal time to set up longer-term financial plans to support your family's future, including taking advantage of tax benefits, establishing financial accounts for your child and updating your will.

New parents have access to several tax breaks that help offset the expenses of raising a child. Knowing which credits apply to you and preparing the necessary documentation can lead to meaningful savings at tax time.

Keep track of important tax dates, especially if claiming credits requires additional forms. Create a digital folder to store receipts for child care expenses, medical bills and other qualifying costs throughout the year. Staying organized saves time during tax season and ensures you don't miss out on any credits or deductions due to misplaced documentation.

Below are tax advantages and breaks that parents can take advantage of.

After birth, revisit your will to secure your child's financial and personal future. Start by designating a guardian who will care for your child if you're no longer able. This is one of the most important decisions you'll make, so choose someone you trust to provide a stable and supportive environment. Next, clearly outline how assets should be allocated, particularly any education savings or custodial accounts you've established. This ensures your child has access to funds for both immediate and long-term needs.

Here are answers to some common questions to give you further insight on how to financially prepare for a baby.

To learn more about financial planning and support for new parents, explore the following MoneyGeek resources.

• Best Health Insurance Companies: Find the best health insurance options to support you and your growing family, considering both coverage and costs.
• Best Life Insurance Companies for Parents: Discover the top life insurance plans for parents tailored to secure your family's financial future.
• Buying Life Insurance for Children: Explore the benefits and considerations of purchasing life insurance for your child.
• Financial Playbook for Married Couples: Review strategies for aligning finances with your partner post-marriage, especially when planning for a family.
• Financial Resources and Support for Teen and Young Parents: Discover resources and financial assistance options available for young parents balancing family and financial challenges.
• Guide to Vaccinations: Learn about health insurance coverage for vaccinations, ensuring your child's preventive care is covered.
• How to Get Newborn Health Insurance: Find out how to secure health insurance for your newborn, what's covered and how to avoid gaps in coverage.
• Life Insurance Guide for New Parents: Explore how life insurance can help protect your growing family and the key coverage options for parents.
• Navigating Pregnancy Discrimination: Learn about your rights in the workplace and the resources available to navigate pregnancy discrimination effectively.
• Tax Guide for Students and Parents: Navigate tax credits and deductions available for parents and students to maximize savings.
• Ultimate Guide to Budgeting: Learn the fundamentals of budgeting to better prepare for current and future family expenses.