How to budget for a new baby

Expecting a new baby? Here’s our top tips on how to budget for your new arrival.

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If you are expecting a baby, you’ll know that life is about to change in more ways than one. One of those changes is likely to be in your financial situation when your new bundle of joy arrives.

While budgeting may not be at the front of every expectant parent’s mind, being aware of your budget can help in the long run when your day-to-day life is consumed by night feeds and nappy changes. Here are our top tips on how to budget for a new baby.

Work out your income

One of the most sensible places to start with any budget is to work out your income. If you don’t know what you have coming in, how can you work out what you can afford to spend?

As expectant parents you are likely to experience some sort of change in your income when your baby arrives. One or both of you are likely to take maternity or shared parental leave and this can lead to a reduction in earnings.

So, one of the key things to consider doing when starting to budget for your new arrival is what your respective employer’s maternity/paternity packages are and how they will affect your monthly finances. Also, consider looking beyond your maternity or paternity leave and what your income is likely to be then. Are you both likely to return to working full-time? Or will at least one of you look for more flexible hours – or perhaps not return to work at all? Whatever your decision, it could potentially impact your future income.

Also, consider your savings. Are you able to cover the additional costs of having a baby with what you already have saved? Or will you be able to use your savings to supplement your income while on maternity or paternity leave? If you develop a better understanding of your savings pot and what you have to work with, this can sometimes take the pressure off a change in circumstances.

Finally, research whether you will be entitled to any benefits once you have had your baby. Is child benefit something you could take advantage of? Or will you be eligible for child tax credit? Benefits like these can make a big difference to new parents.

Calculate your costs

Considering how small they are, babies require a lot of stuff! But if you prepare and budget for what you will need, you can relieve some of the pressure.

Here are some items you may need to consider buying before your new baby arrives:

Furniture – Moses basket or cot, bedding, baby bath

Transport – Car seat (you will need this in order to take your baby home from the hospital), pram or buggy (suitable for newborns)

Changing – Nappies, wipes, changing bag, nappy rash cream, changing mat

Clothes – Baby grows, t-shirts, jumpers, bottoms, socks, vests, hats, coat, gloves

Feeding Maternity bra, breast pump, bottles, steriliser/tablets, formula

Of course, there are countless other costs, such as a thermometer, baby monitor and toys. However, not everything needs to be bought new. There are lots of high-quality second-hand baby items available if you look for them.

One thing to note though, advice from the Lullaby Trust says that your cot mattress should be firm, flat and waterproof. If you do use a second-hand mattress, check that it has been protected by a waterproof cover and that there are no rips or tears. Similarly, for safety reasons, car seats should not be bought secondhand. 

Prioritise your spending

While it can be easy to get swept up in the excitement of preparing for your baby’s arrival and to prioritise funds for your growing family, try not to forget your existing financial commitments. As well as working out what your new income is likely to be, take some time to consider what your outgoings are going to look like.

A useful exercise could be to make a list of all your fixed costs, such as your mortgage payments or rent, council tax, utility bills and fixed monthly outgoings. Then consider whether any of your fixed costs may increase or decrease while you are at home with your baby. For example, you may no longer have any commuting costs which could save you a bit of money. But you may then have the heating on all day when you are at home with your little one, meaning a rise in energy costs.

Also consider what new outgoings you may have. You might want to attend paid for baby groups, or sign up for antenatal classes. In the longer term, it could be a good idea to consider childcare costs if you return to work.

Finally, try to save as much as you can. The reality is that having children can be expensive and can often impact your earning potential. Maybe in the months leading up to the birth consider practicing living on less. This will not only help you adjust to your new financial situation once the baby arrives, but you can also save what you are not spending for expenses further down the line.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.