How to Financially Prepare for a Baby in 9 Months

Preparing to have a baby is life-changing, a time full of promise and possibility. But amid the joy of seeing the baby growing and picking out cute onesies, there’s also the realization that life’s about to change in a major way—not only emotionally, but also financially.

Not to worry. Our checklist for how to financially prepare for a baby in nine months can help you get your finances in order by the time baby arrives. That way, you can spend more time choosing the nursery theme and less time stressing over whether you’re ready for parenthood.

Month 1: Have a money talk with your partner

There are some important conversations you and your partner should have to inform many of the financial decisions you will make in the coming months and years when it comes to your child. Remember that any decisions you make now aren’t set in stone—but the sooner you can discuss your feelings, the better. Here are a few questions to help get you started.

• If your child goes to college, do you want to set up a savings plan to pay for some, most or all of it?
• Will both of you continue to work? If one parent stops working, do you expect it to be a permanent change or a temporary one?
• What do you want to do with your child while they are still young?

While you may make these kinds of decisions along the way, kindergarten and even middle school will be here before you know it. So, if you have ideas now about experiences you want them to have, consider discussing them early so you can start a financial plan to help make it happen.

Month 2: Create a new budget

A baby significantly changes your life—and your budget. So now is the time to start thinking about new costs, both immediate and to come, and the ones you’ll leave behind. For instance, after baby arrives, you’re probably going to pause on going out as much; this is a place you’re likely to find savings. On the flip side, you'll have to buy diapers, baby wipes, food, etc. (and it adds up quickly).

Here are some immediate expenses you’ll likely need to plan for:

• The hospital bill. Even with the best insurance, you’re looking at a substantial bill just for having the baby.
• Your leave. Companies are increasingly offering paid maternity and even paternity leave. But if you’ll be on the hook for a portion or all of your leave, make sure you’re setting aside money now to help make up for that lost income later.
• Baby items. A baby shower may cover a lot of the big-ticket items you’ll need, like a stroller or a car seat. But you’re still likely to make a lot of purchases, from diapers to safety gear.

In addition to these big one-time expenses, you’ll have a lot of ongoing costs, including increased insurance and health care costs. Oh, and if both parents are working, you’ll need to plan for child care.

There is some good news: You do get a little help from Uncle Sam once you become a parent. Among other tax benefits, having a baby qualifies you for the Child Tax Credit, which helps families with qualifying children get a tax break.

Month 3: Build your emergency fund

An emergency fund is a crucial part of financial planning. Having one can mean the difference between putting off important goals when the furnace breaks or being able to pay for repairs without worry. It’s a good idea to save at least six months of your expenses to cover these types of unexpected costs. Make sure your emergency fund is in a good place. If you’re planning to dip into it for baby costs, have a plan to replenish it. If you haven’t started an emergency fund yet, now is the time.

Month 4: Check in on life and disability insurance

You may have gotten some disability insurance when you started working. Perhaps you bought some life insurance when you got married or bought a home. If you already have policies in place, that’s great.

But spend some time this month reviewing what coverage you have to make sure it still suits your needs. If you don’t have life and disability insurance, now is the time to get it. With a baby on the way, you have someone who will depend on your income for the next 20 years or more. Life and disability insurance can give you peace of mind that your growing family will be taken care of if something happens to you.

Month 5: Make a plan for debt

Debt is a reality for most of us—even when we’re not buying new baby things while balancing hospital bills. Don’t worry if you have some debt or even accumulate some during this time. Your goal should be to have a plan to manage the best ways to pay it off.

Month 6: Assess your retirement plan and other financial goals

Your focus right now is on your baby’s next few years. But before you know it, baby will be grown up and self-sufficient. So make sure you’re balancing what you need today with what you want tomorrow. That means this is a good time to check in on your plan for your goals, including retirement. It can seem like a lot to think about right now, but a financial advisor can help you build a plan to meet current needs while making progress toward the future.

Month 7: Start your estate plan

Many people think an estate plan is for multimillionaires. But every adult should have one. Without one, it would be up to a court to determine what happens to your child if both you and your spouse were to die. A judge would decide who would manage any money you leave behind for your child. It’s not a particularly pleasant thing to think about, but it’s also something you don’t want to leave to chance.

Your estate plan will let you make decisions about who will care for your children. You can also specify how any money that you leave for your children—perhaps from a life insurance payout—is managed and eventually passed on to them. (Without an estate plan, they get the money when they reach a certain age, usually 18.)

Month 8: Relax

You’ve done a lot to set yourself up for your baby. This is the last month before the chaos of an infant begins. Use this month to enjoy some time and get ready for what’s to come—maybe even indulge in a splurge.

Month 9: Set up some financial accounts for your child

Once your child is born, make sure to get him or her a Social Security number, which you’ll need before you can open any financial accounts on your child’s behalf. Here are a few you may want to consider opening soon after the delivery.

Traditional savings account: When you open a custodial account for a child, it’s typically in that child’s name—but you have control of it until they reach the age of majority, which varies by state but is often 18. With a savings account, you have a convenient place to stash a gift if someone gives your child money or a check.

College savings account: If you’re planning to help your child pay for college, there are several college savings options that allow you to save for that now. A 529 plan is one of the most popular options given the many tax benefits it can provide.

Life insurance: You and your partner may have your own policies, but you may want to consider a life insurance policy on your child as well. While it may not seem like something you need, there are a number of benefits you may not have thought of that could help your child later in life.

Though this checklist is a good way to start financially preparing for a baby, meeting with your financial advisor can help ensure you’ve covered all your financial planning bases—both for now and after your baby has grown.