Key takeaways

• A baby’s first year could cost around $20,745, excluding childbirth expenses.

• A new government account can unlock $1,000 in seed money contributions for a new baby.

• Planning ahead with savings, benefits, and tax strategies can help manage costs.

Money plays a major role in Americans’ plans for having a baby, as most people say finances are the top reason they’ve limited or planned to limit how large their family grows.¹ But exactly how much does it cost to have a baby?

Initial data shows that over 3.6 million babies were born in the U.S. in 2025, a drop of 24,000 from 2024’s count. This follows a generally downward trend of births over the past several post-pandemic years, during which consumers have also been concerned about affordability and the economy.²

But preparation can be key to building confidence when preparing financially for a baby. Empower research has found that people understand the need to prepare for money milestones. Nearly half of Americans (45%) wish they had started saving earlier for big life events — like welcoming a baby — and the same amount say having a financial plan helps increase their success.

Figuring out the best financial approach for having a baby starts with learning what it’ll take to save wisely for the new arrival and a realistic estimation of added monthly costs.

How much does it cost to have a baby?

Typical expenses for a baby’s first year — including childcare, diapers, gear, clothing and feeding — cost around $20,745.  Your local cost of living, the cost of childcare in your area, and whether you upgrade with luxury and tech-focused baby products could push that figure higher.³

Another big financial factor is the cost of childbirth, which can vary depending on the medical situation like how the baby is delivered and any additional hospitalization needs. Generally, the total price of pregnancy, delivery, and postpartum care is over $20,000 on average before insurance, while out-of-pocket costs average $2,700 due to insurance factors.⁴

How to prepare for a baby financially

Create a “baby fund” to prepare

Opening up a separate high-yield savings account can help pay for healthcare and birth costs, fund daycare bills, and offset other big-ticket items. What starts as a way to pay for new-baby expenses may pivot into a place to save up for a house down payment or vacation fund.

Consider location and housing

Federal data shows that the cost of childcare has been on the rise since 2020, jumping 25.8%. It’s worth thinking through whether “sandwich generation” adults needing to care for young children and older relatives could benefit from the growing trend of multigenerational living, alleviating some of the childcare stress and keeping family members close by.

Understand medical plan coverage

Having a baby is a time where it’s important to learn the ins and outs of your health insurance plan — what’s covered, what isn’t, and how much your premium may increase. American families have been putting a slice of their budget toward medical insurance, with a typical couple with two kids (ages 0-14) spending an average of $1,506 each month.

Consult plan documents ahead of time to understand the cost of coverage and how to add your new arrival to your healthcare plan. Your insurance companies, medical providers, and company human-resources departments can help guide you and clarify any specific definitions.

Offset healthcare costs and bills

Whether you already have a health savings account (HSA) or medical flexible savings account (FSA) or decide to open one to be effective during the calendar year of the baby’s birth, each strategy can be helpful to use pre-tax dollars to prepare for the arrival.

Read more: Health savings accounts have tax advantages for life

HSAs have no time limit on when you can be reimbursed for medical expenses, though you must qualify by participating in a high-deductible health plan. Those in a different insurance plan can benefit from an FSA, though there are time restrictions for qualifying expenses.

Contributions in these accounts may be used to buy pregnancy-related gear like:⁵

• Breastfeeding / pumping supplies (such as nursing bras, pump, and equipment)

• Prenatal vitamins

• Postpartum recovery items

The pre-tax money can also be used to stock up on essential baby toiletries ahead of time such as:⁶

• Sunscreen

• Thermometer

• Allergy medicine

• Pain relief

• Cold and cough medicine

• Diaper rash / healing ointments

• Eczema creams

Note that regular baby diapers and baby formulas are not eligible under typical HSA or FSA plans.

In addition to saving receipts for tax-favored reimbursement accounts, keep all documentation around the pregnancy, delivery, birth and the first year of baby’s life. Depending on how much you pay yourself after any insurance coverage, you may be able to get a tax break in a year that sees higher medical costs (like when having a baby). At tax time, out-of-pocket medical expenses that add up to more than 7.5% of your adjusted gross income can qualify as itemized deductions. There’s no maximum that you can deduct.

Read more: 2026 tax deductions that could help lower your tax bill

Another option to consider is hospital indemnity insurance, which may be offered through your employer’s benefits package or can be purchased separately. It’s separate from a regular medical insurance plan, and the premiums cover eligible hospital stays, and childbirth may require more time in the hospital afterward. You could then receive a payout afterward depending on your specific coverage terms and length of stay.7

Money moves to make when baby is born

Make changes to workplace benefits — quickly

Having a baby or adopting generally triggers a “qualifying life event,” in which workers are allowed to add the new child to their insurance plans and make other adjustments to their workplace benefits. Workers may have a limited period of time (typically 30 or 60 days from the birth) to make any changes to their benefit offerings, so time is of the essence for parents. Otherwise, you’ll have to wait until your company’s next open enrollment period to change coverage.8

Beyond medical care, other employer benefits are in focus once baby arrives:

• Re-evaluate the amounts in a medical flexible savings account: People can save up to $3,400 in a medical FSA in 2026, and up to $680 can roll over into 2027 depending on your employer’s setup.

• Enroll in a dependent care flexible savings account: If you know you’ll be paying a provider for childcare once they’re born, opening a dependent care FSA is a wise move. You fund the account with pre-tax dollars, and then can reimburse yourself as you make payments. Single taxpayers and those married filing jointly can set aside $7,500 in a DCFSA for 2026 ($3,750 maximum for those married filing separately).

Read more: Tax planning for parents: Credits, 529s, and dependent care explained

Start baby’s savings goals with new accounts

As soon as a child is issued their Social Security number after the birth, parents may consider opening up accounts to build savings and take advantage of the power of compounding.

• 529 account: Parents looking to get a head start on savings can use a 529 account to tap tax-free growth for their child’s eligible education expenses and possibly retirement, thanks to the ability to roll over up to $35,000 in qualified funds into a Roth IRA.

• Trump account (530A account): This new custodial-style account is owned by the child, while a parent or guardian acts on the child’s behalf until they turn 18. There’s seed money available for new babies: Children born from January 1, 2025, through December 31, 2028, will receive a one-time $1,000 contribution into their account from the federal government.

Welcoming a new arrival

Figuring out how much it costs to have a baby can be a very stressful time in parents’ lives, and getting a plan in place for money matters in advance can give more peace of mind and leave more time to nurture the new family member.