Banking for a baby? How to budget for your bundle of joy without going broke

Having a baby or thinking about it?

Congratulations!

Now, hold on to your wallet because the wild ride is just beginning.

Here are the practical costs to plan for when bringing home baby.

And the ones that most parents completely forget about — partly because of sleep deprivation, but mostly because these financial matters are not cute or cuddly.

Set up costs for your bundle of joy

When I was pregnant with my first a few years ago, my Instagram feed was chock-a-block pushing baby-related content to buy: clothing, breast pumps, strollers (with cooling fans and shocks), cribs, mattress pads, baby toys, bassinets, swaddles, pillows, and, and, and.

I even received a checklist with more than 50 items to buy for the baby, from one of my mom’s friends. 

It was overwhelming, and when I feel like that, I slow down to think. Do I really need that? What can wait?

There are really only a handful of essentials, including a car seat (the hospital will check that you have this before they release you), stroller, a safe place for baby to sleep (bassinet or crib), a place to sit and feed the baby, diapers, comfortable clothes for baby and birthing mother, a thermometer, bottles, a pump and formula (if breastfeeding isn’t an option). 

Over time you’ll need larger clothes, a safe place to put the baby down for a few minutes and likely a backpack carrier, but time is on your side for those items.

If your budget is tight, be strategic with costs.

If you have a gift registry, add the essentials to it, and scour the “gently used” second-hand market for any large items like a crib.

Borrow from friends, and if you’ve got access to good quality hand-me-downs, embrace them. This will save you hundreds — if not thousands — of dollars.

Resist overspending on initial baby gear

This is just the beginning of the costs related to babies, so overspending on non-essentials takes money away from other financial priorities.

The first of these is the price of parental leave. Unless your employer has a benefits plan to top up your income while on leave, most parents take a serious pay cut for the 12-to-18 months you’re off.

The Canadian government’s Employment Insurance program helps close this income gap, if you are eligible, and maxes out at 55 per cent of a parents’ earnings, up to $695 a week.

Most parents use savings to cover the difference between their costs (rent or mortgage, car payments, groceries) and EI, plus any employer top-up money.

This is why I advise my community to start saving before the baby arrives. Otherwise, they could end up thousands short, and be forced to take on debt.

This reduced income scenario needs to be worked into your ‘once-baby-arrives’ budget

The second important cost is insurance.

It’s advisable for parents to increase their life, disability and critical illness insurance along with health insurance (and don’t forget to add the baby to whatever benefits plan you already have once they arrive).

If something happens to a parent, there’s way more at stake — a child’s long-term well-being and the ability for a parent to parent well.

Review the coverages you already have with a broker, and add anything that’s missing. 

A quick note on health insurance: many plans now offer fertility treatment coverage. If you know you want to start a family it can be worth exploring this coverage option should you need it.

The third cost of getting a will.

New will-making technologies through companies like Willful.co and LegalWills.ca can help reduce those costs at around $100 for a digital will.

If anything happened to you, your will directs the executor who would care for your children, how your money would be managed and when it would eventually flow to your child. 

Contributing to a Registered Education Savings Plan (RESP) is another great move to start once your baby is born. Budget how much you can afford each month and set up regular payments. Those 17 years will fly by and you’ll be surprised at how much you’ve banked for your child’s higher education.

And there’s free money! Not only do your contributions grow tax-free, the government chips in 20 per cent on the first $2,500 saved each year (up to $7,200 total) through the Canada Education Savings Grant (CESG). Even small monthly contributions can grow significantly — a huge gift for your child’s future. 

When you become a new parent, your budget will likely see new line items, typically grouped under a ‘baby’ category.

This includes recurring costs like creams, diapers, wipes, food, and any necessary prescriptions.

Beyond baby-specific expenses, parents may also find themselves spending more on groceries, physio, medicine, and even audiobooks for those long stroller walks.

All of these new costs should be incorporated into your budget. If there doesn’t seem to be enough money to go around for all of this, it’s important to see where you can cut back or cut out other expenses to make room.

Welcoming a baby means welcoming a whole new financial reality — one that’s manageable with a thoughtful budget, smart planning, and a clear focus on what truly matters for your growing family.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.