Baby Budget: Reviewing your finances while waiting for baby

12 March 2024 by National Bank
A pregnant woman and her partner play in the living room with their child.

The arrival of a baby is the perfect time to review your finances, budget and much more. Savings plans, insurance, parental benefits... Here’s everything you need to know to prepare for this major life change.

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How do you budget for your baby’s arrival or adjust if necessary? 

While the birth of a child comes with new expenses, it can also lead to cutting back on other costs, such as outings and travel. If you’re expecting a child, it’s a good idea to adjust your budget – or make one if you haven’t done so already. This will give you a clearer picture of your financial situation and any adjustments you may need to make.

A word of advice: before your baby arrives, try to reduce your debt as much as possible, or even pay them off completely, to reduce your financial stress.

Don’t know where to start?

→  Check out our article on debt management to make repayment easier.

Plan your expenses

Baby-related costs can vary considerably. For example, some parents prefer to buy new baby gear while others prioritize items donated and loaned from friends and family. Regardless of your circumstances, the key is to be well-prepared to minimize unexpected expenses.

→  Read our article to learn more about the cost of raising a child.

Here are the main categories to include in your budget:

Breastfeeding is probably the most economical option. If you choose this approach, you’ll need suitable clothing, a breast pump, a nursing pillow and nursing pads.

Commercial baby formulas come in multiple forms: ready-to-feed bottles, concentrated liquid, or powders for mixing with water. Ready-to-feed formulas are generally more expensive than formulas that need to be mixed, though prices will vary according to the brand and retailer.  

In terms of solid foods, costs will depend on your cooking habits. The more purées you prepare yourself, the less expensive they’ll be.

Don’t forget that you’ll need a highchair or another secure seat for your child during meals, as well as baby and toddler-friendly dishes and utensils.

Here’s a list of items related to feeding that you may need:

  • Breastfeeding:  
    • Suitable clothing
    • Breast pump
    • Nursing pillows
    • Nursing pads
    • Nipple cream
    • Breast milk storage bags
  • Commercial baby formulas
    • Ready-to-feed bottles and concentrated liquids
    • Generally more economical option: powdered formula
  • Solid foods (depending on your cooking habits)
    • Generally more economical option: make your own purées
  • Highchair or another secure seat
  • Bibs
  • Baby dishes
  • Baby bottles
  • Bottle sterilizer
  • Bottle cleaning brush

Diapers, hygiene and personal care
Disposable diapers are often cheaper when purchased in larger quantities, though prices vary according to the brand and retailer. Do you prefer cloth diapers? You’ll have to pay more for the initial equipment, but once you’ve paid for it, this option can be more economical. This is especially true if your municipality offers grants for this type of product. And as an added bonus, it’s the most sustainable option.

Don’t forget that you’ll also need personal care and hygiene products such as baby shampoos and soaps, towels, bath accessories, creams, ointments and more.

Here’s a list of baby hygiene and health items you may need:

  • Diapers
    • Disposable or cloth diapers in various sizes
    • Diaper disposal pail
    • Diaper bag
  • Hygiene
    • Small bathtub or bath seat
    • Mild soap
    • Shampoo
    • Brush and comb
    • Finger toothbrush
    • Baby wipes
    • Saline water
    • Nail clippers or file
    • Washcloth and towel
    • Scissors
    • Teething toys
    • Pacifiers
    • Pacifier clip
    • Moisturizing lotion
  • Personal care
    • Thermometer
    • Acetaminophen
    • Syringe
    • Heating pad
    • Zinc oxide cream
    • Antihistamine

You’ll need safe furniture for your baby to sleep in, but also for their hygiene (changing table). Think about items you’ll need to decorate your child’s room and make it a special place. Rocking chairs, for example, are a favourite among parents.

Here’s a list of items you might need for your baby’s room:

  • For sleeping:
    • Crib
    • Crib mattress
    • Waterproof mattress cover
    • Fitted sheets
  • Furniture:
    • Rocking chair
    • Changing table
    • Changing mat
    • Changing mat cover
  • Extras
    • Nightlight
    • Mobile
    • Toy box
    • Humidifier
    • Stuffed toys and more

There are two important elements to consider: seasons and growth. Babies grow fast, so you’ll need to change their wardrobe about three times in the first year. In the years that follow, you’ll need enough clothing for each season.

Here’s a list of clothes you might need to get started:

  • Diaper covers
  • Anti-scratch mittens
  • Pyjamas
  • Socks
  • Coat (or snowsuit)
  • Hat and toque
  • Shoes and slippers

Transportation and activities
Each mode of transportation requires specific equipment. For example, for walking, you’ll need a stroller or baby carrier. If you’re travelling by car, you’ll need a carrier and a car seat, then a booster seat once your child is older. But you don’t have to buy everything at once.

Are you a runner, cyclist, cross-country skier or hiker? There’s specialized equipment to help you safely enjoy these activities with your child.

Here’s a list of items you may need for transportation:

  • Walking
    • Stroller
    • Stroller mittens
    • Baby carrier or sling
    • Blanket
    • Mosquito net
    • Rain cover
    • Cup holder
  • Driving
    • Car seat
    • Mirror
    • For winter: car seat cover
    • Anti-UV sunshade
  • Extra
    • Travel bag

Child care
Costs vary by province and the type of services you have access to. Tax credits or child care allowances can help reduce the expense.

How can you prepare for a drop in income during parental leave?

Reviewing your budget also means looking at your income. When a child is born, parents usually take parental leave to care for their newborn. It’s not only possible but also advisable to prepare your finances for parental leave before your baby’s arrival.

→  Find out if you are entitled to EI maternity and parental benefits on the Canadian government website.

How can you revise your savings plan to reflect your new baby budget?

A new baby is a major life change, and you may need time to adjust your family finances. Since your expenses may exceed your income for some time, it’s important to take a long-term look at your budget and assess whether it’s possible to reduce certain costs.

→  Check out our article on household budgets and follow the steps to create your own.

Have you managed to save some money? Congratulations! Develop your savings habits, initially to create an emergency fund for unexpected expenses but also to prepare for medium- and long-term projects such as your retirement. Remember, when it comes to saving, the earlier you start, the more it pays off.

Review your savings strategies to take advantage of the right benefits at the right time

Your income will likely be lower during your parental leave. As a result, you may have to reduce your RRSP contributions. If this is the case, you can carry forward your unused contribution room until your income returns to its usual level. And once you resume your RRSP contributions, you could get more from the other credits and allowances you’re entitled to. Since your taxable income will decrease thanks to the RRSP tax credit, some of your allowances and credits could increase.

Are you saving $25 a month or more? Consider opening an RESP for your child.


Contributing to a Registered Education Savings Plan (RESP) allows you to put money aside for your child’s post-secondary education. Thanks to the federal government’s contribution of a certain percentage of your investment, as well as the possible support of your provincial government, this investment vehicle offers a potential return of over 20%.

→  Check out our article to learn how RESPs work.


Contributing to a TFSA can also be an attractive option, since your money grows tax-free but is still accessible when you need it.

How should you adjust your insurance coverage?

Do you have group insurance at work? You can probably modify the terms outside the usual period to adapt them to your new family situation. Don’t forget to account for the impact these changes will have on your income once payments are deducted, and ask your employer whether you’ll have to pay your premiums during your parental leave or once you return to work.

The arrival of a child is also a good time to think about how to protect your loved ones in the event of disability, serious illness, accident or death. Fortunately, there are a number of insurance solutions to help protect your family. An insurance professional will be able to advise you.

What benefits and allowances are available for children and new parents?

Canada’s federal and provincial governments offer various tax advantages, benefits and family allowances to parents, both before and after the birth of a child.

Child benefits and credits

Many benefits and credits are available to families. When you register the birth of your baby, you can also fill out the Automated Benefits Application form to register for Canada child benefits.

→  Visit the Canadian government website and fill out the form that applies to your situation based on your province of residence. 

Here are some other benefits and credits to know about (note that most of the following links redirect to an external site):

This tax-free monthly payment helps families provide for their children. If you’re eligible, you could receive up to a maximum of $7,437 per year for each child under the age of 6 and up to $6,275 for each child aged 6 to 17.

This tax-free payment is made quarterly to eligible Canadians for partial recovery of GST/HST paid. For married or common-law partners, the credit can be up to a maximum of $650 per year. If you’re a parent, you may also be entitled to $171 per year for each child under the age of 18.

Your province or territory also offers its own specific programs. Find out which ones are available in your area.

This tax-free benefit is for families supporting a child with a disability under the age of 18. It’s paid monthly with the Canada child benefit.

The key to being financially prepared for your new baby is thinking ahead and reviewing your budget. A financial professional can also provide you with advice tailored to your specific situation.

Would you like to discuss this with us? Contact your National Bank advisor or your wealth advisor at National Bank Financial. Don't have an advisor?

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Invest in you: dedicated to women’s finances

Discover practical tips and tools designed to help women improve their financial independence.