Preparing your finances for a baby

People say a new baby changes everything. Your little bundle of joy will certainly mean big changes to your finances.

Latest estimates put the mid-cost of raising a child at £194,246 per child.

Reviewing your finances before the baby arrives can put you in a stronger position to deal with those extra costs.

Here are the ‘baby steps’ you should take to prepare your finances for a baby:

Baby step 1 – Prepare for a drop in income

Start by checking what paid leave you’re entitled to, and whether your employer offers enhanced maternity or paternity pay.

If you’re employed or have recently stopped working then Statutory Maternity Pay is paid for up to 39 weeks: 90% of average weekly earnings for the first six weeks, then the lower of £194.32 a week or 90% of weekly pay.

If you’re self-employed, you may be able to claim Maternity Allowance of £27 to £194.32 a week for up to 39 weeks, depending on your National Insurance record.

Then review your household budget to see if it can absorb new costs, from nappies and formula to extra washing.

If you are thinking about having children sometime in the future, you may want to consider starting to saving now. Use an account paying a competitive interest rate so your cash works harder until you need it, however it is worth noting that interest rates vary between accounts and may change over time.

Baby step 2 – Cut the costs of having a baby

Babies may be small, but their shopping list could be large. They will need cots, prams, changing tables, car seats, sterilisers, bottles, baby carriers and more. And they will get through vast quantities of disposable nappies in their first year.

Apart from the disposables, you could save by going second hand. Because babies outgrow things quickly, there are always nearly new bargains to be had. Vinted, Facebook Marketplace and local parent groups can help you save hundreds, if not thousands, of pounds.

Of course, friends and delighted grandparents can be keen to help out.

Baby step 3 – Review your emergency fund

Your budget and emergency fund need to grow with your family.

Unexpected bills and problems with employers can come at any time, but if they coincide with your baby’s early years, the effect can be multiplied. Check your savings will still cover three to six months of essentials once baby costs are included.

Baby step 4 – Remember your pension

When money is tight, it’s tempting to make pension contributions the first thing you cut. But a short pause now could cost more than you think in retirement.

Keeping contributions going during maternity leave can make a huge difference your long-term retirement outlook, thanks to the power of compounding and the generosity of the taxman and his reliefs adding to the contributions you make.

During paid maternity leave, employers generally maintain pension contributions at your pre-maternity level. But check. Pension rules can change and benefits depend on circumstances. Remember if you have been using salary sacrifice to build your pension faster, you may have to look carefully at your budget.

Baby step 5 – Protect your new family

Becoming a parent brings new financial responsibilities If you don’t have life insurance, this can be a good time to put cover in place. Cover for both members of a couple is vital, even if only one of you is bringing in an income.

You may be able to reduce the costs of life insurance with a joint policy. As the name suggests, these provide cover for couples but will usually only pay out on the death of one partner.

Review workplace benefits too. For example, if they include private medical insurance, you may be able to add your baby from day one.

Writing or updating your will is also important, especially if you and your partner are unmarried.

Baby step 6 – Consider professional financial planning

Budgeting, planning, insurance, and planning for their future as well as yours is daunting. But it can be much easier with some expert help.

At Continuum we know the financial effects of welcoming a baby into the world, and about the ways to make those effects a little easier to manage.

If you are thinking about starting a family, speaking to a financial planner could help you prepare your finances for a baby and consider your wider financial plans.

Call us today.

How Much Does It Cost to Raise a Child in the UK in 2026?

Emergency Fund Calculator | Rainy Day Funds – HSBC UK

Maternity Allowance: What you’ll get – GOV.UK

This article is intended for general guidance only and is based on the opinion of Continuum it does not constitute financial advice. Individual circumstances vary, and you should consider seeking advice from a regulated financial adviser before making any financial decisions.

A pension is a long-term investment; the fund value can go down as well as up and this can impact the level of pension benefits available. Pension Income could also be affected by interest rates at the time benefits are taken. Pension savings are at risk of being eroded by inflation

The Financial Conduct Authority does not regulate taxation advice or will writing.