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If you’re expecting a baby soon – congratulations! The first year can be expensive, but there are ways to stretch your dollar. If you are looking to save up for that first year, here’s everything you need to know.

When I was pregnant with my first child, it seemed like there were a million decisions to make and a million things to purchase. Should I get a hand-me-down stroller or splurge for one that costs almost as much as a car? Where did I need to spend a lot of money and where could I economize? Also, in official reports, the biggest costs were often listed as rent or mortgage, as couples moved into bigger homes to accommodate a larger family. But I wasn’t moving and the costs I faced didn’t seem to be captured in these reports.

The most recent data from the Expenditures on Children by Families report in 2017 breaks down how much most families spend each year on their children:

  • Single parent or married parents making less than $59,200 a year spend between $9,330 – $9,980
  • Married parents making between $59,200 – $107,400 a year spend between $12,350 – $13,900
  • Married parents making more than $107,400 a year spend between $19,380 – $23,380.

But these numbers are for children in general, not specifically for the first year. And because the first year is unique–you’ll be taking parental leave, even if it’s quite short–and if it’s your first child, you’ll need to get a lot of new gear (clothes, car seat, crib), the setup costs can be overwhelming.

I’ll break down the costs I faced over the first year of my child’s life to help you budget for your first year of parenthood, so you can avoid spending $235,000 over the next 18 years.

Use Personal Capital’s free dashboard to start keeping tabs on your financial journey. It’s a great tool to get a big picture view of your finances. Read more about it in our Personal Capital Review.

The Big Expenses

There are some expenses you can’t get around: the birth, missed income, and (if you aren’t a stay-at-home parent) childcare.

The Birth

If you don’t have health insurance already, now is the time to look into getting it. Open enrollment for healthcare through healthcare.gov is November 1st – December 15th, 2020. And if you’ve recently lost a job or had a life qualifying event, you can sign up immediately.

If you have health insurance through your employer, you’re looking at an average out-of-pocket cost of $1,000 – $2,500 for the birth, according to a report that came out earlier this year from the Health Care Cost Institute. And if you don’t have insurance – those numbers skyrocket to $8,000 – $20,000.

Check to see what your yearly deductible is – that’s the amount of money you have to cover before your insurance kicks in. And call your insurance company to understand what costs you’re expected to cover. Even with that information, it can be really hard to estimate your costs until baby comes.

If you can, put money into a health savings account (HSA) or a Flexible Spending Account (FSA) before the birth. That money goes in tax-free, meaning that the out-of-pocket costs for your birth are all pre-tax dollars.

Total Cost: $1,000 – $2,500, ideally pre-tax money

Missed Income

This isn’t typically thought of as an expense – after all, missed income isn’t something you have to payout. But in terms of your budget, it has the same effect. And for many, it will likely be the biggest line item. Let’s break down how this works.

After having a baby, parents are granted up to 12 weeks of unpaid leave through the Family Medical Leave Act (FMLA) – but that’s only if you work for a company that qualifies (many small businesses don’t). If you’re covered by FMLA, your job is protected for 12 weeks for you to recover and bond with the baby.

So how much are you out if you take unpaid parental leave? The median income for women age 25 – 34 in the U.S. is around $45,000, according to statistics from the U.S. Department of Labor. Three months of unpaid leave is about $11,000 of lost income. (Plus, when you aren’t getting paid, you can’t contribute to your 401(k) plan). And this is assuming just one parent is taking paid leave.

If you don’t have paid parental leave, you’ll also want to think about how you’ll pay your own monthly healthcare premiums while you take time to bond with your baby. Many employers will have you pre-pay your monthly contributions since they aren’t able to deduct those from your non-existent paycheck.

Depending on where you live, your state may provide some sort of parental leave (or maybe even your city). States with paid family leave laws include California, Oregon, Washington, New York, Rhode Island, Connecticut, New Jersey, and Washington, D.C.

If you’re lucky, you work for a company that will pay your full or partial salary while you bond with your baby.

Check with your state and employer to see what they cover. Many women stitch together a few weeks of parental leave with paid sick leave, paid vacation time, and paid disability leave.

Do the research on laws in your area and ask HR to clarify what your company’s parental leave policies. Once you know how much you’re likely to be out, you can start saving for that loss of income (check out this guide on making a money plan for maternity leave).

Total Cost: Up to 3 month’s salary per parent (or more, depending on how long you take off)


By far, this was the biggest added expense to our budget. But what you’ll end up paying depends on where you live, the type of facility you use, and if you can get a family member to help out.

Infant care in a daycare setting is expensive – the Economic Policy Institute lists average costs across all 50 states on their website. These range from $500 a month to almost $1,600 a month (and that’s just the averages, meaning costs can go much higher).

If you can’t find a daycare (spots are often hard to get for infants and with the pandemic, it’s estimated that up to one-third of daycares will permanently close), nannies or nanny-shares are other options. These are typically paid by the hour, but nannies are employees, so you’ll want to make sure you’re paying the applicable taxes. One survey found that nannies cost almost $2,500 a month, though your cost will depend on where you live. With a nanny share, you might pay only two-thirds of that cost, so about $1,600 a month.

One way to minimize the cost of childcare is to contribute to your employer-sponsored Dependent Care FSA. This is a pre-tax account that you can put up to $5,000 per year (per household). You can then pay some of your childcare expenses through this or get reimbursed (my plan allowed for the latter). It doesn’t reduce the cost of childcare, but I was able to pay $5,000 tax-free, which is better for your budget than paying it after taxes. This saved me around $1,500 a year in taxes. Make sure your childcare provider meets all the requirements, otherwise, you’ll be putting money aside you can’t use.

While childcare costs for a baby are expensive, these typically go down after age two (when the student-to-teacher ratio changes).

Total Cost: Upwards of $6,000 – $30,000

Setup Expenses

I was overwhelmed by choices the first time I went shopping for baby gear. You can spend a fortune setting up the perfect nursery (in fact, sites like the Bump estimate you’ll spend around $2,000 for a nursery), but what really matters is that it is safe and your child feels loved.

I asked a few friends who already had kids to list out everything they actually used for their baby and to give recommendations on the brands. That helped me narrow down what I thought I’d actually use.


Here’s some gear you’ll probably need, with estimates on the lower end of what you find if you shop new. But remember, with most everything, you can get this gear second-hand.

  • Crib: $100+
  • Bedding + Mattress: $50+
  • Changing table: $50+
  • Glider or rocker: $100+
  • Baby monitor: $25+
  • Car seat: $50 – $500. You can buy these used, but many experts recommend buying a new one to make sure the seat hasn’t been in an accident and isn expired.
  • Stroller: $50 – $1,500
  • Baby swing: $100+
  • Sling or other baby wrap: $20 – $200
  • Diaper bag: $20 – $200
  • Toys (play mat, bouncer, swing, activity center): $200+
  • Safety gear (childproofing supplies, gates, etc.): $150+
  • Highchair: $40 – $250
  • Baby books: $25+ (though you can borrow books for free through your local library)

Total Cost: $980+

Related: Money Moves to Make for Expecting Parents

Ongoing Expenses

There are some expenses that you’ll have to pay monthly.

Health Insurance

You’ll need to add your new baby onto your insurance policy, and this will bump up the cost. You can check out healthcare.gov for plans on the exchange. Or you can use a tool like Policygenius to comparison shop plans. And if you want tailored help understanding the costs/benefits of your employer-sponsored plans, check out predictaBill.com.

Total Cost: Varies based on plans


Unless you’re looking into elimination communication (a process where parents learn their baby’s cues that they need to go), you’ll be buying diapers all the time. I ended up using a subscription so that I never had to worry about running out. I spent about $85 a month on diapers and wipes for the first year of my son’s life.

And don’t forget that you’ll need to dispose of all those smelly diapers. I used a diaper pail – the pail itself wasn’t so expensive, but the refills were. Budget at least $100 for them.

If you use cloth diapers, you may be able to cut your expenses (there’s debate here on how much this really cuts expenses in the first year, but if you have more than one kid and use diapers for multiple years, the savings should add up). A major drawback to cloth diapers is the upfront cost – this can be more than $500. If you can find second-hand cloth diapers (or at least the outer shell), that can help bring down the cost significantly.

Total Cost: $85-$95/month ($1,020/year)


Babies are constantly growing and go through about four or five different sizes of clothes in the first year alone! Because they are constantly outgrowing clothes, I think this is the perfect place to try and save money. Get hand-me-down clothes or shop at consignment stores. My favorite consignment store is Mommy’s Trading Post because I can find great deals on baby clothes, toys, cribs, strollers, and even clothing for me. I’ve gone in and spent less than $50 but went home with a huge bundle of clothes. Look for a local store or join online parent groups to find deals.

Total Cost: $40+/month ($480/year)


If you want a night off and don’t have family around to help, you’ll need to hire a babysitter. The average cost for a babysitter varies drastically depending on where you live, so ask other parents for both recommendations and prices. A basic guideline is that you’ll spend $10 – $20 an hour.


If baby is exclusively breastfed for the first six months, the only ‘extra’ food costs you’ll have is for mom. If baby drinks formula, you’re looking at $100 a month or more.

If you want to pump milk for your baby, your health insurance is obligated to provide you with a pump. But, it’s up to you to buy the bottles, cleaning equipment, and anything else you’ll need to feed the baby. At the low end, budget at least $50 for these (new).

Once baby transitions from being exclusively breastfed or bottle-fed (typically around six months old), you’ll find your food budget goes up. Mine didn’t go up dramatically – I tried to make a baby-friendly version of whatever I was eating, but the baby pouches of pureed veggies and fruits are really handy.

Total Cost: $25 – $100/month ($600/year)

Saving for College

You’ve just had a baby – is it really time to start thinking about their college years? Yes – because of compound interest! Even if you can only manage $25 a month, set up a 529 college savings plan. After 18 years, you would have put away $5,400. With an average annual return of 6%, you’re looking at a total of almost $9,600 in savings. Put away $200 a month and you’d have more than $76,000 by the time your little one heads off to college. Seriously, this money is better spent here than on another toy.

Whatever you can afford to put away will help you in the long run. And this money can be taken out tax-free, as long as it’s used for educational purposes.

Total Cost: $25+/month ($300/year)

Total Costs

Your costs will depend on how much you want to spend on gear, whether you have paid parental leave, and if you need childcare. Let’s take the categories we ran through earlier, making some assumptions about costs and income for a new parent:

  • Hospital bill of $1,500
  • Childcare of $1,200 a month or $14,400 a year, but you use the Dependent Care FSA and save $1,500 a year in taxes, so this evens out to $12,900/year
  • Gear of $1,300
  • Diapers $1,020
  • Clothing $700
  • Food $800
  • College savings plan $500

= $18,720

But, if we want to account for your actual budget, we need to account for lost income:

  • One month of fully paid leave (through a combination of parental leave, paid sick leave, and paid time off) with a salary of $45,000/year and two months of no income = total lost income of $7,500

Cost for the first year =$26,220

You might find you spend a lot more or less, especially if you have family to help out or are a stay-at-home parent.

Bottom Line

From the cost of the birth, lost income, diapers, and all the gear you need for your little one, having a baby is expensive. There are some costs you can’t get around – healthcare, diapers – but others that you can shop second hand for and find great savings. Remember that while toys are great, what your baby really needs is you – so just do your best.

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Author Bio

Total Articles: 7
Kate Chrisman is an American freelance writer and editor based in Berlin. She has a master’s degree from the London School of Economics. She thinks everyone should talk more openly about money. You can find her at katerchrisman.com.

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