The Financial Shock of Having A Newborn

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Maternity leave

Many companies offer a short-term disability insurance policy to cover the time Mom is out of work to have a baby or for any complications during pregnancy. Still, the average policy only pays a fraction of Mom’s gross income and then only for four to eight weeks after the birth (policies vary so be sure and check). For a maternity leave beyond the set time, or if Mom or Dad decides to take advantage of the Family and Medical Leave Act (FMLA), it will be at zero pay unless you use vacation or sick leave.

Preparation: Try living on one income for several months prior to your child’s birth.

Life insurance

You should consider increasing your life insurance prior to the birth so that each spouse will be financially able to raise the child through the college years. Go with a level term policy that is convertible to permanent at some point in the future.

Preparation: check out to get a quote from a top rated insurer.

Diapers and wipes

Whether you use disposable diapers or cloth, they’re not free. The average baby goes through 10 to 12 diapers each day and if you use disposable wipes, count on spending a minimum of $100 per month to keep that little bottom clean. If you plan to use a cloth diaper service, you may make out a little cheaper but it has its own drawbacks. Be careful what you believe, both have their advantages and proponents (and lobbies and websites and assertions).

Preparation: do your own investigation. Ask friends which system they preferred and don’t be swayed by rabid proponents either way, and possibly consider laundering your own. That will save a lot of cash.

Formula and breast feeding

Formula can be a big shock. A general rule of thumb is that a baby needs 2.5 ounces of formula per day per pound of body weight. While breastfeeding can certainly minimize that expense, it isn’t as free as you may think. There are breast pumps, lanolin ointments, nursing garments, and breast feeding pillows to add to your expenses.

Preparation: find out how much savings you could realize by breastfeeding and then shop hard to find the best prices.

Baby food and cereals

Once your newborn reaches four to six months, he or she will begin to want more solid food and cereals (just wait til they’re teenagers!). Baby foods can get expensive so consider making your own by pureeing fresh steamed organic carrots, broccoli, or other vegetables.

Preparation: invest in a quality baby food maker and learn to make your own baby food.


The cost of children’s clothing is ridiculous, rivaling the cost of adult clothing ($34.99 for baby Nike’s?). Babies grow so quickly that they need new clothing regularly and even when friends give you clothing as gifts, many times your child has outgrown them by the time the season is right!

Preparation: shop at consignment shops and yard sales and remember: since children outgrow their clothes so fast, it doesn’t make sense to splurge on the latest fashions.

Portable gear

The amount of gear babies need will blow your mind. Strollers, car seats, toys, swings, monitors, bouncy seats, changing tables, cribs, baby beds, cradles, pacifiers, bottles, plates, bowls, sippy cups, high chairs, bibs, bathtub seats, safety supplies, blankets, sheets, and of course, the giant backpack (or little red wagon) to haul it all around.

Preparation: don’t be afraid to have second-hand gear. Shop at yard sales, consignment shops, and thrift stores to find some great deals. Also network with other parents or family to use gear they no longer need or use.

Child care

If both parents work, or plan to, they better be prepared for one of the largest financial shocks associated with having a child – child care. Paying someone to care for your child can cost anywhere from $5,000 per year for a family day care center to $20,000+ for a live out nanny (and don’t dare forget the taxes). My wife quit work 18 years ago when our first daughter was born so we didn’t have this shock, but we did have the shock of losing her salary.

Preparation: investigate the childcare options available in your city and decide which one meets your needs and values. Be sure to evaluate whether you or your spouse’s income will be vaporized by childcare, work clothes, transportation costs, meals, and other items associated with having a job.

No one is ever really prepared … you can’t be

Sure, maybe a lottery winner is prepared, but for rest of us having a baby has its own financial shocks. The fact is that few families begin thinking seriously about the money a child requires until after they become parents, so you are not alone if you haven’t considered these types of expenses.

But … you are in a LOT better shape than I was. You know what to expect and if you’re willing to follow the preparation recommendations above, you’ll be miles ahead of other newborn parents.