Financial Planning Checklist for New Parents

Welcoming a new family member is one of life’s most exciting moments. Between decorating the nursery, reading parenting books, and preparing for sleepless nights, it’s easy to feel overwhelmed. But here’s something that shouldn’t get lost in the shuffle: financial planning for new parents.

Raising a child isn’t just an emotional challenge, it’s also a financial one. When adjusted for inflation through age 17, U.S. News reports that middle-income families can expect to spend approximately $322,427 raising a child. That’s a significant investment. But with the right financial plan, you can confidently navigate these costs while still reaching your other financial goals.

This comprehensive checklist will walk you through everything you need to know when financially preparing for a baby, including how to save money ahead of time, tax benefits to explore, and investment strategies to keep your retirement planning on track.

Looking for a personalized financial plan for your growing family? Contact ARQ Wealth at (480) 214-9572 for a free consultation tailored to new parents.

Step 1: Create (Or Update) Your Budget

Welcoming a new baby into your family also means welcoming new line items into your budget. Be prepared for expenses like:

1. One-Time Expenses: These include delivery and medical costs, plus baby gear essentials like a crib, car seat, stroller, baby monitor, changing table, and countless smaller items.

2. Recurring Expenses: These include diapers, baby formula, clothing, and, further down the line, baby food and childcare.

ARQ Wealth Tip: Consider creating two separate budgets. One budget for during your pregnancy period and another for after your baby arrives. This helps you prepare for both the immediate costs (such as hospital bills and nursery setup) as well as the ongoing monthly expenses that will become your new normal.

Step 2: Build Your Emergency Fund

Your emergency fund is even more important now than ever. Unexpected costs, job loss, extended parental leave, or urgent home and car repairs will present a much bigger challenge when you have a baby depending on you.

It’s generally recommended to have cash reserves that cover 3 to 6 months of living expenses. Remember to base this projection on your new, post-baby budget, not your pre-baby expenses. If your monthly expenses were $4,000 before baby and are now $5,500, you should aim for between $16,500-33,000 in your emergency fund.

That said, even having just one or two months of expenses can help reduce the financial impact of unexpected expenses.

Step 3: Evaluate and Update Your Insurance

You should be prepared to update your health insurance plan within 30 days of your baby’s birth. This is a crucial deadline, and if you miss it, you may have to wait until the next open enrollment period, during which you will be without insurance coverage. 

It’s a smart idea to plan ahead of the baby’s arrival by selecting an in-network pediatrician and verifying that your plan covers prenatal care, delivery, and pediatric care. You should also budget for increased monthly premiums, as adding a dependent usually raises your insurance costs.

Some parents also prefer to have life and disability insurance, which provides financial security if a parent passes unexpectedly, ensuring your child can still be cared for, the mortgage gets paid, and college remains possible. However, this is not always a necessity.

Step 4: Optimize Your Tax Strategy

New parents are eligible for several valuable tax credits that can significantly reduce their tax burden. Understanding and utilizing these tax benefits is an important part of financial planning for a baby. 

Here are some strategies you should be aware of for tax season:

1. Take Advantage of Tax Credits: The Child Tax Credit provides up to $2,200 per qualifying child, directly reducing your tax bill dollar-for-dollar. The Child and Dependent Care Credit helps offset childcare expenses while you work, potentially saving you thousands of dollars annually. Lower-income families may also qualify for the Earned Income Tax Credit, which can be substantial.

2. Set up a Flexible Spending Account: A Dependent Care FSA allows you to set aside pre-tax dollars for childcare expenses. In 2026, you can contribute up to $7,500 per family, effectively giving you a tax discount on childcare costs. A Healthcare FSA works similarly for qualified medical expenses not covered by insurance.

3. Explore a Health Savings Account: If used correctly, an HSA offers a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. 

4. Update Your Tax Forms With Your Employer: Be sure to notify your employer when your baby arrives so they can update your tax information to reflect your additional dependent. This adjustment helps you avoid over-withholding taxes from each paycheck and overpaying your federal income tax obligation.

Step 5: Determine Your Childcare Plan

For most working parents, childcare represents the single largest line item in their post-baby budget. Maternity or paternity leave (if you’re fortunate enough to have it) will end before you know it, and it can be helpful to establish a plan before it does. 

Here are a few of the most common strategies for addressing child care:

1. One parent Staying Home: This is the most affordable option, since there’s no cost for a parent to stay home. However, you’ll have to factor in the loss of income if that parent typically works.

2. Daycare Centers: If both parents plan on working, then daycare is the most common option. 

3. Hiring a Nanny: This option tends to be more expensive than daycare, but provides maximum flexibility and one-on-one attention.

4. Family Care: If it’s an option, having help from grandparents or other relatives can significantly reduce costs.

According to Care.com’s 2025 survey, more than half of parents (57%) spent at least $9,600 per year on childcare, with many spending significantly more. For this reason, it’s important to establish a clear childcare plan as early and cost-effectively as possible.

ARQ Wealth Tip: Double-check the cost of having both parents work and paying for childcare compared to having one parent stay home. Childcare is expensive, and it may be worth forgoing a second income to minimize childcare costs.

Step 6: Automate and Simplify Your Finances

Being a new parent is exhausting, and the last thing you’ll feel like doing is checking your bank statement, balancing the budget, and tracking household expenses. Consider taking a few steps to simplify your finances before your baby arrives:

1. Set Up Automatic Transfers: Automate everything possible, including emergency fund contributions, retirement account contributions, and recurring bill payments.

2. Consolidate Where Possible: Review all your accounts and close any unused, unnecessary services or subscriptions. The mental load of managing fewer accounts is worth far more than you might expect when you’re running on four hours of sleep.

Loop in a Financial Planner: Having a professional money manager in your corner can be invaluable, especially during the first few months of having a child. They’ll be able to answer questions, provide guidance, and take some financial tasks off your plate. If you hire a tax advisor, they’ll also be able to help minimize your mental load during tax season, as well as take advantage of any new tax laws.

Step 7: Start Saving for College

Let’s be honest: college is expensive and getting more so every year. Preparing for future education costs as early as possible can drastically reduce the burden on your budget, while also helping reduce your reliance on student loans down the road.

Consider this hypothetical scenario: If you save $200 per month from your child’s birth to age 18 at a 6% average annual return, you’ll accumulate approximately $75,000. Start the same $200/month savings plan when your child is 10 years old, and you’ll only accumulate around $25,000. That 10-year head start nearly triples your total savings.

If you want to start planning for your child’s education as soon as possible, then consider setting up a 529 college savings plan or looking into other investment options. Tax-advantaged college savings accounts allow your contributions to grow tax-free, and withdrawals for qualified education expenses are also tax-free.

Step 8: Don’t Forget About Your Retirement

Here’s a truth many new parents struggle with: your child’s financial security depends on your own financial stability. It’s the “put your oxygen mask on first” principle applied to finances. 

That said, it can be difficult to continue making progress towards retirement while accounting for all your new baby expenses.

How to Balance Both Goals

If possible, do your best to continue contributing to your 401(k) or individual retirement account (IRA) plans, both before and after the baby has arrived. This is especially important if your company offers an employer match.

If you pause all retirement savings from age 30-35 to focus on baby expenses, you could lose thousands in future value by retirement due to lost compound growth. Even making a reduced contribution is much more ideal than stopping completely. 

Parents feeling confident in their retirement plan may also want to consider establishing an estate plan. Again, this is where a financial advisor can help both you and your spouse.

Your Path Forward: Financial Security for Your Growing Family

Becoming a parent is one of life’s biggest joys—but also one of life’s most significant financial responsibilities. But here’s the encouraging truth: with proper planning and the right guidance, you can confidently provide for your child while building your own financial security.

You don’t have to implement every strategy in this checklist overnight. Start with the most urgent priorities and then layer in the longer-term planning.

Your Financial Planning Checklist:

1. Create a realistic budget for pregnancy and post-baby expenses
2. Build a 3 to 6-month emergency fund
3. Update your health insurance and consider adding life insurance
4. Optimize your tax strategy
5. Automate and simplify your finances
6. Determine your childcare plan
7. Start saving for college
8. Don’t forget about your retirement

Remember, every family’s situation is unique. What works for one family may not work for yours, and that’s okay. The key is to make informed decisions based on your specific circumstances, values, and goals.

At ARQ Wealth, our advisors specialize in helping new parents create comprehensive financial plans designed to balance immediate needs with long-term goals. Our team of advisors can help you build a secure financial foundation for your growing family.

Schedule a free consultation with ARQ Wealth today or call us at (480) 214-9572 to start planning for your family’s financial future.