Budgeting for a Baby

Whoever said children are priceless clearly never had any. Raising a baby born in 2023 to the age of 18 will cost an estimated $310,605, according to the Brookings Institute.

That’s almost as much as the median price of a house, which was $391,800 in 2023. It’s an overwhelming amount for new parents who want to give their kids the world without entering a world of debt.

The good news is that budgeting for a baby is possible, if you do so in a way that provides your child with everything, he or she needs to flourish without sabotaging your financial security. A pregnancy budget should be approached with the same commitment you’d approach a budget when buying a house. Actually, with more, since it means supporting and caring for a living human being who will depend on you for at least the next two decades.

We’ll run through the essentials you’ll need to help your newborn feel at home and be well cared for, and we’ll give you some tips on how to afford it all.

How to Budget for a Baby

If you’re wondering how to start budgeting for a baby, take a step back and look at the big picture: It’s not just the baby you’re budgeting for, but your family, and your future. In that context, budgeting for a baby is the same as creating any budget, but with the added expense of the baby.

Even if you’re just considering having a baby sometime in the future, it’s never too early to budget and prepare for the added expenses a baby will bring. Some will be one-time expenses; some will be recurring. Familiarizing yourself with the expenses and making sure the money will be there, is the first step. Making sure you have a budget you can live with and run a household on – and sticking to it! – is the next one.

Everyone’s financial situation is different, but the general steps to budgeting for a baby are universal. Let’s take a look.

1. Set Your Priorities

This includes clearing up debt as soon as possible. It also means taking a hard look at “needs” and “wants.” What can you live without? It’s also important to have an emergency fund for unexpected costs. Don’t wait to make spending adjustments, reduce debt, and start saving for an emergency. The sooner you start, the better off you’ll be when the baby comes.

2. Practice Living on a Reduced Income

If the new baby will mean a temporary or permanent income reduction for you or your spouse, start living with that reduction now, putting the difference into a savings account or paying down debt with it. Another little human in your home who needs constant care will be a hard enough transition. Getting used to living on less beforehand will help make it smoother.

3. Plan for Changing Expenses

The baby’s needs will change as it gets older. Be sure your long-term budget is built to accommodate these changes. Some changes are planned — sending a child to private school, for instance. Others may be a surprise — baby becomes a gymnastics star and needs expensive coaching to get to the Olympics. As a child grows, he or she will cost more, no matter what their interests and needs are. Be prepared.

Pre-Baby Financial Planning

Many new parents buy more than they need in the excitement of planning for the baby’s arrival. You might want a really nice rug, a cool rocking chair, or cute pictures to hang in the nursery. Don’t forget, though, that essentials like a safe car seat, crib, food, and diapers come first.

Essentials don’t have to be expensive, especially things like clothes or strollers, which you can find at thrift shops, through family and friends, or community organizations that help new parents.

Here are some essentials you will need for your newborn and what you might expect to pay:

• Crib: $150-$350
• Mattress for crib: $90-$200
• Highchair: $20-$120
• Dresser: $50-$300
• Car seat: $75-$200
• Stroller: $120-$450
• Baby monitor: $70-$400
• Clothes: 0-$50 a month
• Diapers: $150-$275 a month disposable; $125-$200 a month diaper service; $150-$350 upfront cost of cloth diapers and related accessories
• Food: $400-$800 a month if baby only takes formula; $100-$250 once solid food starts
• Toys: $10-$50 a month

There are other items to consider buying for your newborn after you’ve covered the essentials. Research things like changing tables and gates. You may want to move items like that to the essentials list, depending on your circumstances:

• Changing Table: $50-$150
• Rocking chair: $75-$300
• Playpen: $70-$150
• Sling/carrier: $17-$70
• Gates: $20-$50 per gate
• Diaper pail: $30-$130
• Pacifiers: $5-$10 for a set
• Rug for nursery: $60-$300
• Nightlight: $6-$60
• White noise machine: $30-$50

Labor and Hospital Costs

Costs vary depending on state, but the average price of pregnancy, delivery and post-partum care in the U.S. is $18,865. Out-of-pocket average for those with insurance is $2,854. Average vaginal birth cost is $14,768; $2,655 out of pocket. Average cesarean delivery cost is $26,280; $3,214 out of pocket. Mississippi has the lowest average childbirth cost, $7,639; California has the highest, $19,232.

The Children’s Health Insurance Plan for low-income households who make too much to qualify for Medicaid also covers pregnancy in some states.

Nursery Costs and Other Home Needs

Nursery furnishings and costs for other baby products vary widely, depending on your taste and needs, but expect to pay at least $300 for the minimal essentials. Friends, family, and nonprofits can help with these. If you’re given a hand-me-down or inexpensive car seat, crib, or highchair, make sure it’s safe. The U.S. Consumer Product Safety Commission has tips on ensuring baby product safety. Visit cpsc.gov/safety education and search “baby products.”

Ongoing Costs of Raising a Baby

Depending on where you live, it can cost up to $30,000 a year to raise a child, with the U.S. average $20,813. The good news is it gets cheaper with each additional child. The next kid can wear hand-me-downs, share a room, or use an old stroller. Some things will always cost money, though. Food and diapers can’t be shared. Same with medical costs and, depending on the age gap, child care.

Your income level, how many children you have and where you live are big factors in baby costs, but in general, expect to budget the following for some of the major annual recurring expenses of raising a baby:

• Food: $1,760-$2,111
• Transportation: $2,100
• Clothing and diapers: $2,400
• Basic health care: $2,000
• Child care: $4,000-$9,000 depending on region of the country
• Miscellaneous: $1,000, including personal care items, entertainment, and books.

These numbers are general and rise and fall with inflation and what organization is doing the analysis. Research what things cost where you live, and if there are less expensive choices.

Let’s take a deeper look at some of the specifics and how you can save money on your parenting budget.

Diapers and Changing Supplies

More than 90% of parents use disposable diapers. They’re convenient, but expensive, about $1,800 a year or more. They are also not eco-friendly. Several states recently eliminated sales tax on disposables, making them slightly more affordable. Cloth diapers are $150, or more, up front. Ongoing costs are detergent, electricity, and your time. Diaper services often set prices just below local disposable costs, though they don’t operate everywhere. No matter what type you use, you’ll need extras like wipes and powder.

Baby Clothes

Clothing is 6% of the cost of raising a child, according to the USDA. Parenting surveys estimate baby clothes can cost $600 or more the first year. Remember, the baby will grow out of clothes fast. Buying a lot of clothes isn’t cost-efficient. Don’t turn down offers of gently used clothes. Look for baby clothes exchanges on your local NextDoor app, community Facebook group, your church, or nonprofits like the Community Action Program.

Nursing and Feeding Expenses

Formula costs $400-$800 a month if it’s not supplemented by breast milk. Whether to breastfeed is an individual decision, and not an option for all women. If you can, it will save you a lot of money and is healthier for the baby. U.S. workplaces are required to provide a private place for women to pump breast milk, and the time to do it, up to a year after the birth.

Once the baby starts eating solid food, monthly costs are $100-$250.

Baby Toys and Games

Toys may seem like luxuries on a parenting budget, but they’re vital for your baby. According to the National Institutes of Health, play contributes to cognitive, motor, psychosocial, emotional, and linguistic skills development, and is key to self-confidence, creativity, and happiness. Find used toys at thrift stores, exchanges, or toy libraries. Accept hand-me-downs. Babies also enjoy things that cost nothing. Look online for suggestions on how to use everyday objects as safe, fun baby toys.

Child Care and Baby Sitting

The average cost of at-home child care (a nanny), is $28,354 a year; day cares average $9,589, and are more expensive for a newborn, according to the Care Index.

If a relative or friend can babysit for low or no cost, make sure everyone’s clear about expectations, or what looks like an inexpensive option can become a hassle. Some two-parent households find it more cost efficient for one to stay home than to pay for child care.

Parental Leave

Some 40% of employers surveyed offer paid maternal leave and 32% offer paid paternal leave, according to the Society for Human Resource Management. Under the Family Medical Leave Act, parents can take up to 12 weeks of unpaid parental leave if their employer has more than 50 employees. Many states have rules that go beyond the federal mandate.

Check your state rules and with your employer to learn what you qualify for.

Medical Costs and Health Insurance

The American Academy of Pediatrics recommends babies have a well-child visit the week of birth and at one, two, three, six, nine, 12,15, 18, 24, and 36 months. A pediatrician visit costs $80-$150, depending on what state you live in, but will be more if the baby needs tests or treatment.

You can immediately add a new baby to your health insurance plan without waiting for open enrollment. Look into the federal CHIP program for help with baby health care expenses.

Cost of Adopting a Baby

If you adopt a child, the cost of setting up a nursery and other such expenses are the same as bringing any new human into your home. But there are also costs specific to adopting.

A family that adopts a child pays an initial fee, whether it’s to their state in the case of a foster child, to an agency facilitating a private adoption, or to the birth mother. Added fees may include medical and legal expenses, and others unique to the adoption, if they’re not rolled into the initial fee. Research your options carefully if you’re considering adoption. The Child Welfare Information Gateway has resources and information on all adoption types.

Though they vary greatly, initial adoption costs, in general, are:

• Adopting from foster care: $0-$3,000, depending on the state; 26 states have no fee, several others reimburse the initial fee once the adoption is complete.
• Private domestic (U.S. adoption agency): $20,000-$50,000
• Independent: $15,000-$40,000
• International: $20,000-$50,000

Aside from the initial fees, adopting a baby or older child, no matter how you do it, requires a lot of paperwork, vetting and bureaucracy, which means administration and legal fees. That means you will be vetted extensively to make sure you have the capacity and the means to care for the new addition to the family. Each form of adoption also has unique costs:

Costs of Adopting from Foster Care

Foster care is the least expensive form of adoption. There are nearly 400,000 children in foster care in the U.S. in any given year, with more than 100,000 available to become part of a permanent family, ranging from newborns to teenagers. About 50% are adopted. Many children in foster care come from challenging situations and may need additional (often expensive) medical care, counseling, or therapy. Federal and many state governments offer assistance, including monthly payments, Medicaid and cost reimbursement.

Costs of Adopting from an Agency

If adopting through an agency, you pay the initial fee, which will vary depending on the agency. Agencies match expectant mothers to the new family and help facilitate the process. The agencies are regulated by states, and legitimate ones are licensed in your state. Check with your state’s Division of Health and Human Services or its equivalent to find information.

Costs of Adopting Independently

Prospective parents may adopt from a birth mother without the help of an agency. It costs money to find the right mother through advertising or outreach, and an agency or lawyer must finalize the adoption. Parents usually pay the birth mother’s medical costs, legal, and administrative fees. Most states regulate what a fee can cover, and the amount. Hire an attorney who specializes in adoptions to help you with a contract and navigating your state’s laws.

Costs of Adopting Internationally

International adoption costs vary greatly, depending on the country of the child’s birth. The amounts change frequently, as do regulations in birth countries concerning adoptions by U.S. citizens. Expect to pay fees in the U.S. as well as the country of origin, and include the cost of traveling, possibly more than once, to the birth country.

Federal Adoption Tax Credit

Some costs related to adoptions finalized between 2015-2023 can be claimed as a Federal Adoption Tax Credit. The child must be under 18, or not able to care for themselves. All types of adoption, except of a spouse’s children, qualify. Household income must be less than $279,230; maximum credit is $15,950 per child.

A tax credit reduces the amount you owe in taxes, and the adoption credit is based on income, adoption cost and type.

Saving for Your Family’s Future and Paying Off Debt

Your immediate worry when you bring a baby into your home is providing for the child and making sure you’re financially secure. Don’t forget to build an emergency fund, so that unexpected expenses don’t disrupt your cash flow and jeopardize your family’s security. Aim to set aside at least six months of income for the emergency fund.

One way to get a budget in line is to pay off your debt, particularly credit card debt. This should be a major part of budgeting for a baby, and it’s never too early to start. Don’t give up on it, either, once the baby is born. Try to find ways to meet your budget expenses without using credit cards. The more you pay off, the more money you’ll have available to use for bills and baby costs.

It’s also never too early to begin financial planning for your new child’s future. An education isn’t going to be any cheaper once your child is ready for college, and the less debt they take on to pay for it means a more stable start to their adult life.

Some ways to save for your child’s college education:

529 Plan: A tax-free savings account that is used on higher education expenses. Friends and family can also contribute. If you withdraw the money for educational expenses, there is no tax. Withdraw it for anything but education, you will have to pay taxes on it as well as a 10% penalty.

Coverdell Education Savings Account: Maximum contribution is $2,000 a year and the plan is only available if you fall under a certain income limit: $110,000 for an individual, or $220,000 for a married couple filing jointly. Withdrawals to pay education costs are tax-free. Contributions can’t be made after the child turns 18 and must be used before they are 30.

IRA: You can use the money in either your traditional or Roth IRA to help fund your child’s education, but pulling the money out before you are 59 will cost you a 10% penalty, and you’ll also have to pay taxes on it, so this option is better for older parents.

Don’t forget about yourself. Saving for retirement can be hard even without the added costs of raising your child. As your child grows up, you grow old. One you retire, you will need a retirement income. That’s why budgeting is so important. Without budgeting, you’re leaving your future up to chance.

Tips to Save Money for a Baby

Budgeting for a baby includes finding ways to cut costs and increase the money you have available to pay bills, contribute to savings and splurge on that cute onesie you saw online.

Here are a few tips on how to stick to your baby or pregnancy budget:

• Toy libraries: Nonprofits, parent groups and libraries often have toy libraries for babies that lend toys the same way a library lends books.
• Your local library: Libraries not only have books to borrow but also free internet, resources, and story time.
• Breastfeeding: This choice is unique to each individual, but if you’re able to breastfeed, you can cut down on formula costs, which is a major monthly expense with a newborn.
• Have someone throw you a baby shower: Do we need to convince you of the benefits of having family or friends throw you a party where people shower you with baby gifts? The modern baby shower isn’t limited to women but can be for couples as well as single men who are adopting.
• Don’t overpay for your hospital stay: Research the costs and know what you’re paying for. If the hospital charges for watching TV, bring a tablet, your smart phone, or a book, and leave the TV off. Private rooms cost more than shared ones. Know what your insurance covers and what you’ll pay for out of pocket before buying opt-in services.
• Shop second hand: This can’t be said enough. Your baby, who cannot walk, doesn’t need the latest shoes, doesn’t care who Tommy Hilfiger is, or even whether their outfit is a gender-specific color. They just need to be comfortable, warm, and dry.
• Homemade baby food: Got a blender? Water? Some mixed veggies? Look up homemade baby food recipes online to save cash on the grocery bill.
• Ask for help. Local social media pages, the Community Action Program, churches, and nonprofits have support groups, clothing, toy exchanges, babysitting help and new-parent resources. Getting any kind of help or support can not only help your bottom line, but keep you, your baby, and your family happy and healthy.

Assistance for Baby Budgeting

Saving enough money to raise a child is a challenge, especially when you’re also paying down debt. After the baby comes, you’ll still have debt, a mortgage or rent, and hopes for (eventual) retirement. If money was tight before, adding the costs of diapers, formula, baby gear, checkups, and schooling will require creative solutions to keep from falling even deeper into debt.

Before you decide to tackle all this yourself, try credit counseling with a certified counselor who can help you put down a budget that covers all the bases and necessities, keeping you on the right track towards financial security. Counseling will fit right into your budget — many nonprofit counseling agencies, including InCharge Debt Solutions, offer it for FREE!