Navigating the Financial Journey of Parenthood

Welcoming a new baby is one of life’s most exciting milestones. It’s a time filled with joy and anticipation, but it also brings significant change, including financial adjustments. While it’s natural to feel a mix of emotions, a little planning can help ease financial worries and provide peace of mind. By getting organized ahead of time, your family can worry less about expenses and focus more on enjoying the precious early moments in your child’s life.

Reassess Your Household Budget

The arrival of a new baby brings a host of new expenses, from diapers and childcare to healthcare and other daily essentials. Taking time to revisit and adjust your household budget early on can help ensure your finances stay balanced as your family grows.

• Before Birth: Start by outlining expected costs for essential baby gear including a crib, car seat, and clothing. Whether you source items secondhand, use a baby registry, or make new purchases, incorporating these one-time expenses into a pre-baby budget is a crucial first step.
• Hospital Costs: The cost of childbirth has risen significantly. Even with insurance, the average cost is $2,854 – without insurance; it is more than $19,000.
• Leave Time: Plan for changes in income during parental leave. Whether you add a new member to your family by birth or adoption, one or both parents may take some type of leave from their jobs. While paid leave for new fathers has increased, many parents still rely on partially paid or unpaid leave under the Family and Medical Leave Act (FMLA).
• Post-Leave: Once parental leave ends, childcare often becomes one of the largest new expenses. Data shows families spend an average of roughly $11,000 each year for full-day childcare with some types of care topped at nearly $35,000 per year. As you account for your post-baby budget, include other recurring costs like diapers and formula which can average more than $3,000 per year combined.

Prioritize Your Savings

With a clearer picture of the expenses to come, you can begin setting aside funds to cover them. Creating a plan for your savings is just as important as identifying your costs.

• Emergency Fund: Building this safety net that typically covers three to six months of living expenses should be a top priority. It provides a crucial buffer during parental leave or if unexpected costs arise.
• College Savings: It’s never too early to start saving for your child’s education. Opening a college savings account, such as a tax-advantaged 529 Plan, allows your investments to grow over time. As part of the passage of the One Big Beautiful Bill, there are also tax advantaged Trump Accounts. For children born between 2025 and 2028, these accounts begin with $1000 from the U.S. Treasury Department. However, all parents can make a yearly contribution of up to $5000 per year into these accounts. Starting early can make a significant difference in the long run.

Review Your Coverage and Legal Documents

Ahead of the baby’s arrival, now is the time to review your family’s protection and ensure your financial legacy is secure.

• Health Insurance: Compare your employer-sponsored health plans to see what offers the best coverage for your growing family’s needs. Key questions include whether both parents are on the same plan, and which employer’s plan best fits both needs and budget. Confirm your preferred pediatrician and labor and delivery hospital is in-network to avoid unexpected costs.
• HSA and Dependent Care FSAs: Fully utilize any tax-advantaged accounts that are available to you. Employers may also offer Health Savings Accounts (HSA) and Flexible Savings Accounts (FSA), both of which can be used after the child’s birth to cover qualified health or childcare expenses. An HSA can cover medical bills, while a Dependent Care FSA can help pay for childcare expenses with pre-tax dollars.
• Life and Disability Insurance: Secure a financial safety net. A life insurance policy—often recommended at 10 to 15 times your annual income—protects your child’s future if a parent passes away. Disability insurance is equally important to bridge income gaps if you are unable to work.
• Wills and Trusts: Update legal documents after you welcome your newest addition. A will allows you to designate a guardian for your child, while a trust can help manage how assets are distributed. Consult with a professional to ensure your child is protected regardless of what the future holds.

While welcoming a baby brings significant changes to daily life, proactive financial planning can help you feel prepared and confident. For personalized advice or assistance getting started, a financial advisor can help you create a plan tailored to your unique situation. You can also talk with a trusted WSFS Associate by visiting your nearest banking office.

BY MARK BRADFORD, CFP®, ChFC®, CRPC®, AEP®, AWMA®, CEPA® Mark Bradford is the Director of Wealth Planning, where he leads the wealth planning team…