Two months ago, our third niece was introduced to the family. One day she was not visibly “here” and the next day, boom! Her presence was indisputable!

Adding a new family member is a major transition, both emotionally and financially.

While I’m not an expert on the emotional/personal side, I can help you be better when you are financially preparing for a baby.

Here are a few ways you can be proactive in planning for a baby:

1. Do you have a Health Savings Account? If so, max it out.

Babies are expensive and so are the appointments during pregnancy.

If you have a high deductible health insurance plan, you are permitted to open a Health Savings Account (HSA). You can put pre-tax money in this account, spend it on your deductible, co-pays, or other medical bills, and NEVER pay tax on that money! If you have an individual HSA you are allowed to put up to $3,550 in the account in 2020. For a family account, you may contribute up to $7,100.

If you are in the 22% tax bracket, it is like you are receiving a 22% discount on your medical bills!

There is more you should know about HSAs, but that is a major highlight. Investopedia explains more in a helpful article here.

Start building up your HSA balance now,so you aren’t strapped for cash when the baby comes along.

2. Build up your emergency fund.

The actual cost of having and caring for a baby will range significantly depending upon your insurance, childcare situation, and even the state you live in.

Parents have reported spending $2,500/year on diapers, formula, and baby food. 

Parents who use infant childcare can expect to pay at least another $10,000.

Generally, I would say a dual income family should have an emergency savings account that covers 3 months of living expenses. However, if you are preparing for a baby, I recommend increasing that to 6 months of living expenses. If there are complications with the pregnancy or birth, you might need to take time off work. A savings account could relieve the financial strain.

3. Analyze your life insurance needs.

I frequently hear people joke about their demise with comments such as, “Oh if I die, just throw me in a box in the backyard. When I’m gone, I won’t care what happens.” This is only a moderately funny quip people use to avoid having to think and plan.

However, if you have a baby on the way, you need to think about this topic seriously. No one enjoys thinking about their own mortality, but when you could leave behind a child who depends on you, you must.

Where you do you start?

First determine how much life insurance you need. Your life insurance should be enough to cover your debts, income replacement, and funeral costs. A life insurance salesperson will help you… However, be cautious of someone selling you a policy far larger than you need. has a helpful life insurance calculator tool. However, for the most accurate recommendation, I encourage you to talk to a professional.

4. Create a Last Will & Testament.

It is so important for you to create a will when you have a baby on the way. I could list dozens of financial reasons, but most importantly, you want to designate a guardian for your child.

If a baby’s parents pass away, a court determines who cares for the baby. If a will is not established when this decision is made, the child may not be left with whom the parents would have wanted. Therefore, don’t leave it to chance by letting the courts decide! Update your will so your child is more likely to be cared for by your designated guardian.

I haven’t discussed this subject as deeply, but you can read more in my related post here.

5. Celebrate your baby’s birth… and tax savings!

We’ve talked about all the money and planning a baby requires, but there are financial benefits coming as well!

Did you know that you receive a $2,000 tax credit for each child you have under age 16? This is not just a deduction in income, this is an actual $2,000 tax savings.

IDEA: If you can swing it financially, why not contribute that $2,000 to your new child’s 529 plan to get a head start on college expenses?

You can also receive a credit for a portion of childcare costs. For one child, you can apply up to $3,000 of qualified expenses towards the credit. For multiple children, you can apply up to $6,000 of expenses towards the credit.

There are caveats, so read up on the topic.


I have always heard the adage that you will never be ready for a baby. I imagine that is true. However, these steps can make financial preparing for a baby a little smoother and less stressful!