Financial Planning for New Parents

Preparing for a new baby often includes picking out names, setting up a nursery, and scheduling birthing classes. But among the joyful tasks of getting ready, it’s also important to consider how you’ll tackle financial planning as new parents. Here’s a practical guide to the key financial steps to take before your little one arrives.

Start Early 

The months leading up to your child’s birth are an ideal time to get organized. Planning ahead—ideally early in the pregnancy—can help you manage decisions more clearly and reduce last-minute stress. If it feels overwhelming, focus first on what you’ll need in the baby’s first year. 

Build a “New Baby” Budget

Update your household budget to reflect both one-time and recurring expenses. Think beyond gear and nursery items to include medical costs, childcare, and ongoing essentials like diapers, formula, or co-pays. 

Boost Your Cash Reserves 

Growing families often experience increased expenses and, at times, reduced income. Prioritize: 

• Emergency fund: Aim for 3–6 months of essential expenses, factoring in your new baby budget.
• Medical costs: Understand your insurance coverage, including your deductible and out-of-pocket maximum. Don’t forget to add your child to your plan shortly after birth—check your plan’s deadline in advance.
• Parental leave: Review your employer’s leave policy and prepare for any unpaid time off. If one parent plans to stay home long-term, update your budget to reflect that income change.

Get Life Insurance 

If someone depends on your income—or the unpaid labor of a stay-at-home parent—life insurance is essential. Term life insurance is usually the most affordable and effective option, offering coverage for a set period during your highest-need years. 

Create or Update Your Estate Plan 

Estate planning isn’t just for the wealthy. A will, powers of attorney, and guardianship designations are critical tools to protect your child’s future in case of the unexpected.

Make a Childcare Plan 

Whether one parent stays home or both return to work, weigh your options and update your budget accordingly. For working parents, research daycare or nanny costs early, as spots often fill quickly. You may also benefit from tax breaks like Dependent Care FSAs or the Child Tax Credit—consult a financial or tax advisor to explore your options. 

Start Saving for Education 

Education expenses may seem far off, but starting early—even with modest amounts—can make a big difference. Explore 529 plans or other options to take advantage of long-term compounding growth. 

Focus on What Matters 

Welcoming a child is a major life change, and thoughtful financial planning can bring peace of mind during an exciting (and sometimes overwhelming) time. Once your plan is in place, you can focus more on what matters most: enjoying time with your growing family. 

Need help getting financially prepared for parenthood? Our team at Commas is here to support you.