Finances might be the least exciting topic to talk about with your partner when you’re awaiting your baby’s arrival, but it is one of the most important conversations to have. With cost of living through the roof, many Aussie couples are hesitant to have children or are delaying pregnancy until they feel financially secure.
From medical bills and time off work, to childcare, baby expenses can quickly add up. Setting a budget and knowing what money will be available once the baby arrives, can help expectant parents feel confident about starting a family.
Host of The Australian Finance Podcast Gemma Mitchell says financially preparing for a newborn, and more importantly, a reduced household income, is vital to a stress-free postpartum.
“Money doesn’t buy happiness, but it does bring safety, security and choices,” she says.
“Having a budget isn’t restrictive. It’s telling your money what the priorities are, finding out what is important to you, and getting rid of stuff that isn’t important.”
How much does it cost to have a baby?
Costs can vary in pregnancy and birth depending on whether a couple goes public or private, and the health of mum and bub. As the child grows, childcare is often the biggest expense.
A 2019 report stated the average cost of having a baby as $7,918 per year, for the baby's first four years. This research conducted by Westpac found the most expensive item was childcare, costing $4,340 per year, followed by food and clothing.
Costs during pregnancy can include:
- Health insurance
- Medical and hospital bills
- IVF treatment
- Scans and blood tests
- Antenatal classes
- Maternity clothes
Costs for after birth include:
- Nappies and wipes
- Baby clothes
- Cot, mattress and linen
- Car seat
- Pram
- Highchair
- Baby monitor
- Breast pump, bottles, and formula
- Postpartum products and support for mum
- Childcare arrangements
- Developmental toys
Have a conversation about finances as early as possible
For the best start to parenthood, couples need to talk about money before conception.
Gemma, also the author of The Money Reset - a new book for people resetting their finances – says smart planning will result in a smoother transition once the baby arrives.
“The earlier couples have conversations about their values and money management, the better,” she says. “Money can cause a lot of conflict, in an already stressful time.
“You need to get on the same boat about what the expenses will be, what money is coming in, what time off work people will take... Even talk about schools… it doesn’t have to be cemented. Just align thoughts.”
Questions to ask before having a baby
Before you start budgeting for a baby, ask each other:
- Can we afford the upfront and ongoing costs of raising a child?
- What’s our plan for health insurance?
- How will our income and work schedules change?
- What is our plan for parental leave?
- What type of childcare might we use?
- Do we have an emergency fund for unexpected expenses?
- What support systems will we have in place for postpartum?
The biggest financial consideration isn’t the baby – it’s time away from work
When starting a family, couples often spend big on prams, cots and clothes, with many products only being used for a few months.
But the most significant financial restructure for families is how much time is spent away from paid work.
“Hospital and baby gear costs are visible, but loss of income is the hidden, and bigger, impact,” Gemma says. “That’s the one you must prepare for.”
“If there are different values regarding paid and unpaid work, it has to be clear as early as possible, so there is less resentment when the baby comes.”
Tips to financially prepare for a baby and postpartum
- Align financial values early: Be on the same page about how money will change.
- Plan your parental leave: Who’s taking time off, how long for, and what does that look like financially?
- Discuss how money will be managed as a team: Will it be joint or separate accounts? How will expenses be paid and how will this evolve?
- Set a budget and have an emergency fund for unplanned costs.
- Stress test your budget before the baby comes: If you know you’re going to live on less income, adapt early. Practise good habits and cut down on credit.
- Communication is key, not just pre-baby, but as the household needs change.
- Stay flexible: Babies are renowned for messing up well-thought plans.
Do I need a savings account for my baby?
Couples often wonder if they need to save or invest for their baby. Gemma says parents should put themselves first.
“I always say, ‘put your own oxygen mask on first’, make sure you are managing your own money well before you worry about savings for your baby,” she says.
“Ideally you should have a bit of an emergency fund. That’s for when the fridge or car breaks down. A buffer to get through unplanned expenses is the best thing you can do for a baby.”
Ways to save money before having a baby
- Assess your baby shopping list on a want vs need basis and be wary of baby marketing.
- Find out what you really need by talking to other parents. Ask friends what was helpful, what was nice to have, what was a necessity.
- Rent or borrow big-ticket items like prams, cots and car seats.
- Buy via online marketplaces. Especially items that are used for a short period like carriers and bassinets. (Always follow Australian safety guidelines)
- Sell items as your baby grows out of them.
Stay open and be flexible with your financial plans
Millennial money adviser, and She’s on the Money podcast host, Victoria Devine became a mum for the first time in March last year.
Despite being super savvy with her cash, the Melbourne mum admits she’d do things differently if she prepped for another birth.
“I thought I’d mapped everything out, but things change,” she says. “You don’t always know what you’ll need until you're in it. What I’ve learned is the power of flexibility.”
Her greatest advice for parents is to set aside income for unexpected expenses.
“The best thing we did was build in a buffer, not just to cover costs, but to give ourselves space to breathe,” she says.
“That space made all the difference to how I recovered, how we parented, and how supported I felt in those early weeks. It’s not about dollars, it’s about capacity.”
Victoria advises parents to ask questions before birth, particularly around medical costs. She learned “the hard way” that private insurance doesn’t mean full coverage.
“Ask your GP or obstetrician about bulk billing, shared care, or even being a private patient in a public hospital as all of those can make a big difference,” she says.
“Explore options. You don’t need the most expensive system to feel safe and supported. The more informed you are, the more choice you have.”
She agrees with Gemma that couples should practise living off one income, during pregnancy and funnel that income into savings.
Tools to use to help with a baby budget
Bringing a baby into the world is exciting, but it will feel even better if you’re financially ready. A little planning before the baby comes, will go a long way later.
For more financial support, you can find a baby budget planner on the Australian Government’s MoneySmart website.
For help with Medicare information and leave entitlements, visit the MyGov’s Before your Baby Arrives checklist
The Raising Children website also has helpful information about preparing for your baby, childcare options and government assistance for child care.
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