I'm a financial planner, and I made 3 careful moves with my money before my first baby was born (2024)

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• I've helped many clients plan for a baby, and I finally went through it myself last fall.
• My wife and I researched the right health insurance, and set aside cash for medical bills.
• We also waited longer to have kids so our budget and cash flow could support our family.
• Check out Vanguard Personal Advisor Services® to get the investment advice you need to help build the life you want »

As a financial planner who works with clients in their 30s and 40s, I've helped countless families financially prepare for major life milestones.

Because my planning firm focuses on that specific age range, we tend to see the same goals and events come up again and again: getting started with investments outside of retirement accounts; buying a first home (or moving to a "forever" home); and adding children to the family.

Most of our clients beat me to that last milestone. But in the fall of 2021, I joined the parent cohort. We had our first child, a daughter, in October — and I finally got a chance to practice what I preach in terms of financially planning to welcome a baby into our home.

Here's what my wife and I did to prepare our personal finances for the new addition, including what worked, what didn't, and what we learned in the process.

1. We were proactive about planning for health insurance and other baby-related costs

We spend a lot of time scanning the horizon for upcoming events and potential changes to our clients' personal financial landscapes. With any event (baby or otherwise), being proactive usually works in your favor.

If you plan ahead, that gives you an opportunity to fully think through options, make mindful decisions, and choose your actions with intention and care.

Of course, there's only so much you can control when it comes to kids. But if growing your family is on your mind, it's not too soon to consider things like:

• What will your health insurance cover for a standard pregnancy and childbirth, and what will you be on the hook for?
• What can you save up for ahead of time? Can you start padding your emergency fund now so you're better prepared to handle any unexpected outcomes?
• Do you need to make changes to your housing situation, or can you make adjustments to your current living arrangements so that where you live now will work for a bigger family?
• Are there specific parenting philosophies or childcare preferences you have that will impact your finances (like having one spouse stay home and transitioning to a one-income household, or both parents maintaining careers and needing full-time childcare support)?

For my wife and me, getting proactive looked like heavily researching health insurance plans to choose the optimal one for us. We also got an estimate of the maximum out-of-pocket cost we might have to pay, and started setting aside money each month just in case.

We also researched all the stuff we'd really need. We started with a general list, and then identified what wasn't truly essential, searched for lower-cost options, or reached out to family and friends to see if anyone had a hand-me-down they'd be willing to share.

2. We made sure our cash flow could handle the new addition

Most people just want to know how much they need to save before having a baby. While that's a very valid question — there are upfront costs, from medical bills to furnishing a nursery to the seemingly endless amount of diapers you'll need — it won't get you very far once the baby is actually here.

That's because kids aren't a one-time expense. A baby introduces a number of new, ongoing costs to consider, from those aforementioned diapers to clothes, toys, and all the other supplies you need to care for a child.

And those costs don't just stop once your kids are no longer babies. If anything, the costs only increase as kids grow older.

We knew it wouldn't be enough to save up a lump sum of cash. We'd also need to create a budget that supported new, ongoing expenses related to having a bigger family, so we focused on answering the question: Can our cash flow handle more costs with ease?

For us, that meant waiting to add a baby to the mix until we felt like we had more financial power. While we considered growing our family years before, we ultimately decided to wait. Neither one of us wanted financial worries to cast a shadow over this big choice in our lives.

That's not the right choice for everyone, but it was an important part of our planning process. We were willing to make some tradeoffs in the decision to wait and focus on our personal financial position first.

We also thought about what ongoing costs would change or go up, and built those into our budget before we were even pregnant, to test if our cash flow could actually handle those increased expenses while maintaining our high savings rate. And if we had extra cash that didn't get spent? We set that aside, too, to pad our cash reserves.

3. We prepared for the unexpected

Not all of the financial decisions that we made in preparation of our daughter's arrival worked out. There were some things we simply could not have predicted beforehand.

For example, hiring a doula seemed like a smart choice. We thought that additional support would be well worth the cost of having another professional on our side.

As it turned out, my wife was in labor for about three hours total and at the hospital for one hour before our daughter was born... and the doula missed the entire thing.

There were also various other items that we thought we had to have before the baby arrived, but didn't need at all. Our daughter hated her $200 bassinet and we transitioned her to her crib earlier than we expected.

It wasn't money wasted, but we did wish we had taken a family member up on their offer to give us a bassinet their baby just outgrew instead of buying new.

And despite all the work we did to choose the right health insurance, our daughter ended up having some additional pediatric appointments, lab work, and ultrasounds in her first four months of life. The initial concern turned out to be a false alarm, but because the extra visits and specialist care were coded as diagnostic rather than preventive, we were on the hook for about $1,500 worth of unexpected medical bills.

Thankfully, in all of these places where things didn't go exactly as we imagined, our proactive planning helped us out: we intentionally increased our cash reserves before our daughter was born to cover unexpected costs.

You can't plan for everything, but you can anticipate that things won't go smoothly every step of the way. Leaving yourself wiggle room to handle events or expenses that you could not have foreseen will help prevent your overall financial plan from breaking down — and that goes for any event, milestone, or major goal that you want to achieve in your life.

Finally, be willing to iterate. It's a variation on the theme of not everything will work out the way you planned, and that's OK — if you can stay flexible, curious, and open to exploring different ways of doing things as life unfolds.