How to Prepare Financially for a New Baby
Preparing for Baby: Financial Planning for the Start of Life
Last week, we talked about preparing for the end of life. So this week, let’s reverse it: how to prepare for the start of life — aka welcoming a new baby (cue “The Circle of Life” from The Lion King).
While birth rates initially dropped during the pandemic, researchers predict a baby boom in late 2021 and 2022 — making this an especially timely topic.
Baby Joy Meets Budget Reality
Let’s be honest: a lot goes into welcoming a child.
There’s baby-proofing, shopping for diapers, furniture, clothes, and more. But also, there’s mental, physical, and financial preparation.
And that last part? It’s significant.
Some studies estimate first-year costs between $20,000 and $50,000 — and that’s before you account for lifestyle changes, career shifts, or future education expenses.
To help ease the pressure, we’ve pulled together some essential tips to financially prepare for your little one.
Financial Moves for Expecting and New Parents
Baby-Proof Your Insurance
Once baby arrives, you’ll need to add them to your health insurance plan — typically within 30–60 days of delivery.
Adjust HSA Contributions
Your Health Savings Account can cover doctor visits, formula, breast pumps, sunscreen, and more. Consider increasing contributions ahead of your due date.
Open an FSA
Flexible Spending Accounts let you use pre-tax dollars on qualified childcare and medical expenses — helping you save throughout the year.
Buy Term Life Insurance
Now that someone depends on you, life insurance is a must. Term policies are affordable and provide critical coverage for your family’s security.
Update Tax Forms
Claim dependent tax credits (not just deductions). These directly reduce your tax liability. Look into the Earned Income Tax Credit and the Child & Dependent Care Credit as well.
Create or Update Your Will
If you read our end-of-life prep article, you may already have a will. If not, now’s the time — and be sure to add your child as a beneficiary.
Consider Long-Term Disability Insurance
It’s not for everyone, but if your situation makes you vulnerable to income disruption, this policy can offer peace of mind.
Rework Your Household Budget
New parents can spend $30,000+ per year per child after year one. Adjust your budget now to avoid being blindsided later.
Borrow Big-Ticket Baby Gear
Cribs, strollers, swings — many of these items are used for just a short time. Consider borrowing from friends or family to cut costs.
Plan for Ongoing Expenses
Diapers, formula, daycare, doctor visits — these aren’t one-time costs. Set up a budget that accounts for monthly essentials.
Build an Emergency Fund
Your “nest egg” is even more essential now. Aim for 3–6 months of living expenses, especially with a growing family.
Start a Tuition Fund
It’s never too early to save for future needs — whether college, trade school, or a first car. Starting early can reduce stress and improve options later.
Let’s Take Financial Stress Off Your Plate
Raising a child is a journey. You don’t have to go it alone.
At NEST, we help Austin families (and beyond!) build financial plans that evolve with their lives. Whether you’re expecting your first child or adding to a growing crew, we’ll help you prepare with confidence.
Our NEST software also models “what-if” scenarios, like what adding a baby does to your expenses, savings goals, and lifestyle — so you can plan proactively, not reactively.
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DISCLAIMER: This content is for educational purposes only and does not constitute financial planning or investment advice. For personalized guidance, contact info@nestfinancial.net.