Financial Planning

The Cost of Raising a Baby

How to save while you spend

Every expectant parent should be mindful of the all-inclusive costs that come with welcoming a newborn, from hospital bills to baby food. But what should you anticipate the price tag to be? The expense of raising a child for middle-income family can exceed $12,000 to $15,000 annually, according to the Department of Agriculture.

If you already are managing your finances closely, props to you. Certainly there is going to be an adjustment to your lifestyle, but you likely have implemented a budget and are anticipating changes to household spending.

On the contrary, if you haven’t been careful with managing expenses, you will need to make a change before your baby’s debut.


To help keep spending in check, while preparing for your baby’s arrival, focus on only necessary expenditures. Group expenses into five areas: managing immediate medical costs, feeding your baby, keeping your child clean and clothed, keeping your baby safe and finding reliable childcare while you work.

Managing Immediate Medical Costs
It’s not easy to figure out the exact total cost for doctor’s fees, hospital stay, delivery and postcare. Don’t hesitate to talk with your insurance company and hospital billing department ahead of time. Find out what’s covered through insurance and what’s not. Ask how check-ups and hospital expenses will be billed. Make sure everything falls under in-network providers. If you’re concerned about the number of bills, make payment installment arrangements with providers. And if it’s early in your pregnancy, consider a flexible spending account (FSA) or health savings account (HSA) to get tax benefits.

Feeding Considerations
The cost of formula adds up, so nurse if you are able. In addition to its many other benefits, breastfeeding can save at least $1,400 during the first year alone. If you plan on breastfeeding, you will need a pump and the equipment can be costly. Consider borrowing a breast pump and only buying new plastic attachments. When you leave the hospital you likely will be given formula and other food samples for your baby. Hold on to them as they will be useful when your child gets a bit older. And when your baby starts to eat solid food, you can make it yourself. In addition to feeding your child cereal, you can give your baby vegetables that you steam and mash. This allows you to keep a close eye on the nutrients your baby receives, and help keeps money in your pocket. If you absolutely need it, buy in bulk instead of individual packaging. For more savings, sign up for newsletters or services like Amazon Mom where you can receive valuable coupons.

Cleaning and Clothing Your Baby
Diapers will be one of your larger expenses — some estimates put the cost at $600 annually. Buying in bulk can save a lot. With clothing, remember that your baby will grow fast, so look for options in secondhand stores and don’t hesitate to take hand-me-downs from friends or family. Besides looking into secondhand markets, websites like provide exchange platforms within your geographical area. Through local communities you not only can find cheap items, but also may connect with fellow new parents to exchange tips and advice.


Keeping Your Little One Safe
Sure you want to have the cute coordinated nursery, but if you’re worried about the cost, stick only with the necessities. You need a safe crib and mattress, but for the first couple of months you may be able to get by with a bassinet. Other than that, you will need a car seat and a stroller. Most new parents know to look into borrowing used baby items or purchasing them on eBay. Be cautious when buying safety items from a used outlet, especially car seats. Make sure they still meet all safety standards. And don’t overlook the costs of child-proofing your home. But remember this is something that you can take on a few months down the road once your baby begins to be mobile.

While You Are Working
Childcare is big expense if both parents return to the workplace. For families with multiple children it’s not uncommon for the cost of childcare to equal that of a mortgage payment. As a parent you won’t focus only on value — here quality is important. If you don’t have a family member, friend or neighbor to rely on, take the time to do research on providers in your area. Perform a background check on childcare services and use parental groups for referrals. The FSA again can become a good tax-saving tool. Parents can use pretax dollars to pay up to $5,000 in childcare expenses in most states.

There are many things to acknowledge with a baby on the way, and money is a big part of it. Raising a child is a costly endeavor. However, with some careful planning and research, you can not only survive, but improve your financial well-being by becoming more disciplined in your spending, finding bargains and exercising smart financial decisions.

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Written by National Endowment for Financial Education (NEFE)

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