How to Financially Prepare for a Baby

A Month-By-Month Guide to Financially Prepare for a Baby

Expecting or in the family way? Follow this month-by-month checklist on how to financially prepare for a baby to keep your finances on track.

Getting ready to welcome a baby can bring up a mix of emotions. You might feel excited, nervous, overwhelmed, and completely unprepared, sometimes all in the same hour.

That’s totally normal.

The emotional side of it all is one thing. The financial side is another, and it deserves just as much attention.

The post ahead takes you through each month with simple steps to help manage your finances before the baby arrives.

Month 1: Start the money conversation.

The earlier you and your partner sit down and talk about money, the better. You don’t need to make decisions that will last forever, but you do want to get aligned on your goals and values. This will prevent miscommunication later when things get hectic.

Some things to talk about:

• Will one of you stay home? If yes, for how long?

• Are you planning to send your child to daycare or hire a nanny?

• Do you want to help pay for your child’s college later?

• What kind of lifestyle changes are you willing (or not willing) to make?

Try to keep the tone open and nonjudgmental. You’re building a foundation here, not locking yourselves into anything permanent.

Month 2: Revise your budget.

Babies are small, but they sure do have a way of making a big impact on your expenses. This is the month to take a hard look at your current budget and adjust it to reflect what’s coming.

First off, looking at what you’re spending now. Then add in baby-related costs like:

• Diapers, formula, wipes, and baby clothes

• Medical expenses related to childbirth

• Potential unpaid leave from work

• Childcare expenses down the line
  

You’ll also want to look at places you can cut back. Maybe that means fewer dinners out or putting off a big purchase. Those minor adjustments now can create more breathing room later.

Month 3: Build up that emergency fund.

If you’ve been meaning to create or grow your emergency fund, now’s the time to do it. You’re about to enter a period where surprise expenses are the norm, not the exception.

A strong emergency fund typically covers three to six months of essential expenses. That might feel like a big number, but even a small cushion is better than none. Set a monthly savings goal and make it automatic if you can. As your baby grows and your budget settles, you can build on it.

Think of your emergency fund as a pressure valve. When something unexpected happens—because something always will—you’ll be glad it’s there.

Month 4: Review life and disability insurance.

If you already have some coverage through work, that’s a start. But now that someone else will depend on your income, it’s worth taking a closer look.

Life insurance helps protect your family’s future if something happens to you. A term life insurance policy is often affordable and straightforward. Think about how much your partner and child would need if your income were to disappear.

Disability insurance is just as important. It covers part of your income if an illness or injury keeps you from working. Many people don’t think about it until they need it, which is exactly when it’s too late.

Month 5: Make a plan to pay off debt.

If you’re carrying debt—be it credit card balances, student loans, or car payments—it doesn’t mean you’re doing anything wrong. Debt is a part of life for many people. What matters now is how you approach it.

List all your debts, their interest rates, and minimum payments. Then decide on a plan that fits your budget and priorities. Maybe you’ll focus on paying down high-interest credit cards first. Or maybe you’ll pause aggressive debt repayment to prioritize savings during this time.

The goal isn’t to eliminate all debt before your baby arrives. It’s to make sure your debt isn’t a source of constant stress while you’re adjusting to parenthood.

Month 6: Don’t forget about retirement.

It’s easy to focus all your energy on preparing for your child. But don’t lose sight of your own future. Retirement might seem far away, but if you stop contributing now, it becomes harder to catch up later.

Even if you cut back a bit, try to keep contributing to your retirement plan. If your employer offers a match, contribute enough to get the full match. That’s free money, and it adds up over time.

Financial planning means thinking about today and tomorrow. You can take care of your baby and still keep your long-term goals in sight.

Month 7: Put together an estate plan.

Nobody enjoys thinking about worst-case scenarios. But having an estate plan in place is one of the most responsible things you can do as a parent.

At the very least, you’ll want:

• A will that names a guardian for your child

• Directions for how any inheritance or insurance money should be handled

• A power of attorney and healthcare directive for you and your partner

Without a will, these decisions are left to the courts. And that’s the last thing you’d want to leave up to chance. An estate plan puts your wishes in writing and brings peace of mind that your child will be cared for, no matter what.

Month 8: Take a breath.

You’ve been budgeting, researching, saving, and planning. Now it’s time to pause. There will always be more to do, but this month is about appreciating how far you’ve come.

If you can, do something just for you and your partner. Maybe it’s a quiet weekend getaway, or even just a few dinners out without talking about finances or nursery themes.

Taking care of your relationship is part of preparing for parenthood too.

Month 9: Set up financial accounts for your child.

Once your baby arrives, there are a few practical steps you’ll want to take. First, make sure to get a Social Security number for your child. You’ll need it to open financial accounts and claim certain tax benefits.

Then, consider starting a few accounts:

• A basic savings account for gifts or birthday money

• An education savings plan like a 529, if you want to start saving for college

• Possibly even adding your child as a contingent beneficiary on your life insurance or retirement accounts

A 529 plan is exceptionally helpful if you plan to contribute regularly to college costs. It has several tax advantages. So, when the baby grows, the money grows with it.

What If You Want to Stay at Home?

One of the most personal decisions you’ll face is whether one parent will stay home.

For some families, it’s an easy choice. For others, it involves a lot of financial juggling.

If you’re hoping to save as a stay-at-home mom (or dad), start by running the numbers. What will your household income be? Will expenses like daycare or commuting costs go away? What new expenses will show up?

There are also long-term considerations. Perhaps you want to step away from work for a few months. It might affect your retirement savings or career growth in the future. Make a plan that feels right for your family, both emotionally and financially.

Talk through your priorities as a couple: How important is time at home versus long-term earning potential? Would part-time work, freelance projects, or remote roles be an option?

While you're having these conversations, don’t forget to give yourself and each other grace. This is a big transition, and no plan needs to be perfect from the get go.

Don’t Forget the True Costs

It’s tempting to focus on one-time purchases: the crib, the stroller, the car seat. But the day-to-day expenses are what really add up.

Diapers, formula, pediatric visits, clothing—these are the ongoing costs that can catch you off guard. And don’t underestimate how quickly babies grow out of things. Try to budget for these recurring expenses and resist the urge to splurge on every new baby gadget you see.

Not everything needs to be new. Secondhand gear, hand-me-downs, and minimalist baby setups can all keep your costs manageable without sacrificing comfort or safety.

Consider Help from a Professional

If all of this feels overwhelming, it’s okay to ask for help. A financial advisor can assist with everything from building a budget to setting up an education savings account.

You don’t need to have a high net worth to benefit from financial advice. Oftentimes, having a neutral person walk through your options will give you the clarity you need to build an actionable plan.

Final Thoughts

Preparing financially for a baby doesn’t happen overnight. It’s a series of open conversations and small tweaks to your expenditures that will help you reach your savings goal.

Of course, you might not hit the exact target. But that’s okay too!

What's more important is that you choose a course of action after carefully evaluating all your options, rather than acting impulsively or passively. It's crucial that you are on top of where your money is going, what your goals are, and how you intend to support the growing needs of your family.

Have a plan in place—emergency fund, life insurance, estate plan, and all. That way, when your baby shows up (probably not on their due date), you’ll be more prepared and feel a little less financial stress.

Remember, one baby step at a time. You’ve got this!