Understanding the Cost of Raising a Baby and How to Create a Financial Plan

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Understanding the Cost of Raising a Baby and How to Create a Financial Plan

Starting a family is an unmitigated blessing — but that doesn’t change the fact that it ain’t cheap. If you’re launching into the wide new world of parenting, it’s important to keep a level head, particularly when it comes to your finances.

The Cost of Raising a Baby

The average cost associated with the first year of raising a child tends to run north of $12,000, and the number only goes up from there. Why is this figure so high? There are quite a few reasons. Just a handful of the expenses that surround the raising of a baby (i.e. after all of the birth expenses) include:


  • Lab work.
  • Prenatal vitamins.
  • Formula and food.
  • A crib, pack and play, and bedding.
  • A car seat.
  • A swing, bassinet, and other baby furniture.
  • Books and toys.


And remember, this isn’t even a comprehensive list. There are countless hidden expenses, as well, such as the potential need to invest in dietary restrictions or unpaid time off from work.

Creating a Family-Friendly Financial Plan

No matter what way you slice it, having a baby is an expensive proposition. Fortunately, you can take steps to mitigate the financial impact. Here are a few suggestions to help you do so.

Create or Update Your Budget

Creating and maintaining a budget is a cornerstone of financial success. Whether you already have a budget or you’re just getting started with your first one, it’s important to address your budgetary needs specifically with your new baby in mind. You can pull together a basic budget by:


  • Calculating your income: Include everything, from your primary paycheck to side hustles, child tax credits, and other predictable forms of income that you may have.
  • Add up your expenses: Track everything from paying student loans, car loans, and rent to small purchases like eating out or even buying a song on iTunes.
  • List out and subtract your total expenses from your income: This is the final step that gives you your initial budget.


While income and expenses are the first steps, there are many other things that you can do to create a baby-proof budget for your growing family.

Separate Needs from Wants

Once you have your total budget calculated, you may find that your expenses are larger than your income. That’s where wants versus needs come into play.


Take the time to parse through your expenses and identify each one as either a want or a need. This includes your baby purchases. For instance, getting a crib and safety-proofing the house are baby essentials. However, purchasing another board book or dropping $50 on a pair of baby shoes before Junior can even walk should definitely be considered wants.


Lump the wants into a group labeled “discretionary spending.” Then, if you find that money is tight, visit this area of expenses as you look for places in your budget where you can reduce what you’re spending.

Identify Short- and Long-Term Goals

It’s important to be aware of what you’re working towards as you strive to build a comprehensive financial plan. There are obvious items that can be included here. For instance, saving up a rainy day fund is a good short-term goal, while paying down large amounts of debt is a wise and admirable long-term objective.


In addition to these, ask yourself questions related to your new family member that can impact your finances over time.


For instance, should one of you quit your job to stay home? Should you buy a house? Do you want to buy a house but you need to repair bad credit first? As you sort through these questions, try to set up financial goals to work toward as a family.

Monitor, Adjust, and Always Be Learning

At this point, you should have a solid grasp of your financial situation. Your budget can help you work through each week and month and your financial goals provide a sort of fiscal lighthouse that you can navigate toward over time.


Once you reach this point, you mustn’t treat your finances as if they’re “set in stone.” Instead, continue to regularly monitor and adjust your plans. Always look for improvements that can be made. Keep an eye out for new financial tools, and generally strive to always be developing your financial literacy.

Creating a Family Financial Plan

As your family grows, keep tabs on your finances for your entire family’s collective future. Create a budget, identify wants versus needs, set short- and long-term goals, and always strive to improve what you already have in place. If you can do this, you’ll be able to provide a financially sound, monetarily stable household for your child as they grow.

Bio: Jori Hamilton is an experienced writer living in the Northwestern U.S. She covers a wide range of subjects but takes a particular interest in covering topics related to child development, parenting, family health and wellness, and mindfulness. If you’d like to learn more about Jori, you can follow her on Twitter and LinkedIn.