Financial Planning for First-Time Parents

Becoming a parent for the first time is both exciting and overwhelming, especially when it comes to managing the financial side of things. From the moment you hear the news, a whole new set of questions arises: How do you budget for baby gear, healthcare, and childcare while still planning for the future? The truth is, effective financial planning is key to navigating this new chapter without added stress. With the right strategies in place, you can confidently manage your finances and focus on what truly matters: your growing family. In this guide, we’ll break down essential tips to help you make smart financial choices from day one, ensuring that both your present and future are secure.

Preparing Your Finances Before Baby Arrives

When clients in Mildura tell us they’re expecting their first child, the excitement is obvious. Then the practical questions start. How much do we need saved? What will it actually cost? Can we afford time off work?

We’ve walked through this with many local families — tradies on fluctuating income, teachers relying on school-term pay cycles, small business owners juggling BAS and baby plans at the same time. The key lesson is simple: preparation reduces pressure.

Step 1: Set a Realistic Pre-Baby Savings Target

We generally suggest aiming for:

AUD 31,000 – AUD 33,000 before baby arrives

That figure can sound steep at first. But once you divide it into categories, it becomes manageable.

Category	Estimated Amount (AUD)	Purpose
Income buffer	15,000 – 18,000	Covers reduced earnings during leave
Medical & birth costs	1,000 – 5,000	Depends on public vs private
Baby gear setup	3,000 – 6,000	Cot, pram, car seat, essentials
Emergency reserve	10,000+	3 months of living expenses

Every household is different. A couple both working full-time in Mildura will have different needs compared to a single-income farming family outside Red Cliffs. That’s why we always look at the numbers in context.

Step 2: Understand Your Income Gap

Many parents assume Paid Parental Leave (PPL) will fully replace income. It rarely does.

From July 2025, PPL will extend to 24 weeks and is paid at the national minimum wage (projected around AUD 948 per week). That may cover basic expenses, but if your normal household income is AUD 1,800 per week, there’s a shortfall.

Normal weekly income – PPL payment = Weekly shortfall

Example:

• Combined weekly income: AUD 1,800
  
• PPL received: AUD 948
  
• Shortfall: AUD 852 per week
  

Over 18 weeks, that equals:

AUD 852 × 18 = AUD 15,336

That figure alone explains why savings matter.

Step 3: Baby Gear – Where You Can Save

We have seen new parents spend AUD 10,000 before the baby even arrives. We have also seen families do it for under AUD 4,000.

The difference? Planning and restraint.

Typical Setup Costs

Item	New (AUD)	Second-hand (AUD)
Pram	800 – 1,500	250 – 600
Cot	400 – 900	100 – 300
Car seat	300 – 600	New recommended
Change table	200 – 500	50 – 150

A Mildura client recently bought a high-end pram for AUD 400 on Marketplace that retails new for AUD 1,200. It had been used for six months. That is money better left in your offset account.

Rule of thumb:
Buy new safety items. Buy everything else smart.

Step 4: First-Year Running Costs

Australia is not a low-cost country. Even in regional Victoria, the expenses stack up.

Estimated First-Year Baby Costs (Excluding Childcare)

Expense	Estimated Annual Cost (AUD)
Nappies & wipes	800 – 1,500
Formula/feeding	1,000 – 2,500
Clothing	500 – 1,000
Medical & pharmacy	500 – 1,200
Miscellaneous	500 – 1,500
Total	4,310 – 9,620

Nappies alone can surprise people. One local couple told us they felt like they were “burning through cash as fast as nappies.” Buying in bulk during supermarket promotions made a noticeable difference over 12 months.

Step 5: Timeline for Financial Preparation

Breaking preparation into stages makes it less overwhelming.

6–12 Months Before Birth

• Review the household budget
  
• Build a 3–6 month emergency fund.
  
• Compare public vs private hospitals.
  
• Check private health waiting periods.
• Estimate income shortfall
  

3–6 Months Before Birth

• Finalise baby gear purchases
  
• Apply for Paid Parental Leave
  
• Confirm Family Tax Benefit eligibility.
  
• Register for Medicare Safety Net
  

0–3 Months After Birth

• Track actual expenses
  
• Adjust budget
  
• Review insurance cover
  
• Begin childcare planning
  

This staged approach keeps things steady. No need to boil the ocean in one weekend.

How to Choose Between Public vs. Private Health Care

One of the first big decisions you’ll make as a soon-to-be parent is whether to go with the public or private health system for your pregnancy and birth care. Each option has its pros and cons, and your choice will play a significant role in your budget. As someone who went through the process recently, I can share some insights to help guide your decision.

Public Health Care: Covered by Medicare

If you choose to go the public health care route, the good news is that much of your pregnancy and birthing care will be covered by Medicare, Australia’s public health system. Most public hospitals offer free services, which is a huge relief, especially for first-time parents trying to save for the many other expenses ahead. However, while the medical care itself is free, there can still be some out-of-pocket expenses. These usually range between AUD 0 and AUD 1,500 depending on the specific services you need, such as scans, tests, or medications.

Private Health Care: More Control, Higher Costs

Opting for private health care gives you more control over your care, such as choosing your obstetrician and birthing hospital. However, it comes at a high cost. Even with private health insurance, the out-of-pocket costs for private care can range between AUD 3,000 and AUD 5,000. This is because you’ll still be responsible for some expenses like your obstetrician’s fees, hospital room charges, and anaesthetist fees.

When we were expecting, we had to weigh the benefits of having a private obstetrician and selecting our own birth hospital against the extra costs. In the end, we opted for a private hospital, but the cost was something we had to plan for months in advance. We even set up a special savings account dedicated to birth-related costs, so we didn’t feel the strain on our regular savings.

Medicare Waiting Period: Plan Ahead

If you’re considering private health insurance to cover pregnancy-related costs, be mindful of the 12-month waiting period for pregnancy-related services. This means that if you plan to get pregnant soon after taking out private insurance, you might need to wait for up to a year before you can claim any maternity-related expenses. This waiting period can really catch people off guard, so it’s crucial to plan ahead. When I first looked into it, I didn’t realise how long the waiting period was, and it delayed our plans for using private insurance.

Medicare Safety Net: Reduce Your Medical Bills

A great tip to reduce your out-of-pocket costs is to register for the Medicare Safety Net. This program is designed to help families who have high medical expenses by increasing the rebate you receive once your out-of-pocket costs reach certain thresholds during a calendar year.

For example, once we hit a set threshold for medical costs, the Medicare rebate on certain services increased, which helped offset some of the costs of ongoing tests and specialist appointments. It’s a simple step that can make a big difference in the long run, especially if you foresee significant medical expenses as part of your pregnancy and birth journey.

Child Care Subsidy (CCS): Affordable Child Care for Working Parents

Child care is one of the highest ongoing costs that new parents face, especially if both partners return to work. Thankfully, the Child Care Subsidy (CCS) can reduce these fees, making it easier for parents to continue working while ensuring their child is in a safe and nurturing environment.

Starting January 5, 2026, the “3 Day Guarantee” will provide at least 72 hours of subsidised care per fortnight for all eligible families, regardless of whether both parents are working or studying. This was a relief for us, as we were able to access child care subsidies that reduced the financial burden during the early days of our child’s life. If you’re returning to work after your leave, this is definitely something to take advantage of.

Protecting Your Family’s Financial Future

Once your little one arrives, your priorities will shift. What once felt like a world that revolved around just you and your partner now has another small human to care for. That means your financial planning needs to reflect the added responsibilities. As a parent, ensuring your family’s future security is essential—whether through insurance, wills, or long-term savings strategies.

Life Insurance: Protecting What Matters Most

It might seem like a morbid topic, but life insurance is one of the most crucial financial safety nets for a growing family. The moment I realised that my child’s financial security depended on more than just day-to-day budgeting, we decided to invest in life insurance. It gave us peace of mind knowing that, if something happened to either of us, there would be a lump sum to cover the mortgage, bills, and future expenses.

When choosing life insurance, consider how much your family would need to maintain their lifestyle if one parent were to pass away. Would your spouse be able to stay in the family home? Could they continue saving for retirement? Life insurance doesn’t just cover funeral costs—it ensures your family can carry on without sacrificing their standard of living.

Income Protection Insurance: Safeguarding Your Earning Capacity

What happens if you’re unable to work due to illness or injury? Many parents, especially those in the workforce, overlook income protection insurance until it’s too late. This type of insurance can cover up to 75% of your salary, which helps keep the household running in the event of unexpected health issues that stop you from working.

For me, this was an eye-opening realisation. While life insurance protects against death, income protection ensures that you don’t run out of funds if you’re facing a temporary setback. Imagine the stress of caring for a newborn while also worrying about how you’re going to pay bills due to a sudden illness or injury. With income protection, you can focus on getting better, rather than on how you’ll keep the lights on.

Don’t Forget Primary Carers: Insure Everyone

Here’s a critical piece of advice I didn’t realise at first: don’t forget the primary carer—even if they’re not earning an income. You might think that income protection is only necessary for those who work outside the home, but that’s a misconception. The primary carer (whether it’s you or your partner) plays a vital role in the household, and it can be costly to replace their role. Consider how much it would cost to hire help, whether it’s a nanny or a housekeeper. If either parent becomes ill and is unable to care for the baby or manage the household, income protection can help cover those costs.

Estate Planning: Securing Your Family’s Legacy

I remember the night we sat down to make our will—it was one of the more sobering parts of preparing for parenthood, but also one of the most important. Estate planning ensures that, if the worst happens, your wishes for your children and assets are respected. If you don’t have a will, your estate could be divided according to intestate laws, which may not align with what you want.

A key part of this process is nominating a guardian for your children. Without a clear guardian, your child could be placed with someone you wouldn’t have chosen. This is particularly important in Australia, where many people don’t realise the need for a clear legal directive regarding guardianship. In our case, we made sure to name a trusted family member to care for our child in case something happened to us.

Testamentary Trusts: Protecting Your Children’s Inheritance

While writing our will, we also learned about the benefits of including a testamentary trust. This type of trust allows you to protect your children’s inheritance from things like bankruptcy, relationship breakdowns, and even poor financial decisions. It can also help with tax splitting benefits, which is especially important as your family grows.

For example, if you and your partner have substantial assets, a testamentary trust could help reduce the tax burden on your children’s inheritance by distributing the assets in a way that’s more tax-efficient. A testamentary trust is a way to protect your child’s future financial security and ensure they have access to their inheritance at an appropriate time—without it being eroded by taxes or other factors.

Saving for Your Child’s Future Education

The costs of raising a child don’t end with baby gear or hospital bills. One of the most significant long-term expenses you’ll face is education. Whether you’re considering private or public schooling, starting your savings early will ensure your child has access to the best opportunities without you having to sacrifice your own financial security.

Cost of Education in Australia: A Serious Consideration

The cost of 13 years of private schooling in Australia can exceed AUD 300,000 in major cities, and for many parents, this can seem like an insurmountable amount to save. But, as I learned, there are ways to start planning for your child’s education without derailing your financial future. The key is to start early—whether that means investing in education-specific savings accounts, setting up a dedicated fund, or simply educating yourself on available options.

For us, the idea of private schooling was a significant financial commitment, so we looked into various ways to save for education, starting with a high-interest savings account and an education bond.

Education Bonds: A Tax-Friendly Savings Option

Education bonds are a great option for parents who want to save for their child’s education. These bonds, also known as scholarship plans, allow you to invest money, and the earnings are taxed at a flat 30% rate within the bond, rather than at your personal marginal rate. If you hold the bond for 10 years, the withdrawals become tax-free, making them an incredibly tax-efficient way to build savings for your child’s future.

We decided to open an education bond when our child was born, and the peace of mind it provided, knowing that we were setting aside money for their future education,n was invaluable. The ability to earn interest at a lower tax rate and make tax-free withdrawals later on is a huge benefit in the long run.

Tax Benefits: Get Some Money Back for Education

In addition to education bonds, the Australian government offers an Education Tax Benefit. This benefit refunds 30 cents for every 70 cents of earnings spent on approved education costs, such as tuition, uniforms, and textbooks. Over the years, this benefit can add up, especially if you’re investing in a quality education for your child. It’s something many parents overlook, but it’s an excellent way to ensure you’re getting a return on your education savings and planning effectively for the long term.

Becoming a parent is a life-changing experience, and with the right financial planning, you can approach it with confidence. While the costs of raising a child can seem overwhelming, starting early with budgeting, saving, and taking advantage of government benefits like Paid Parental Leave (PPL) and the Family Tax Benefit (FTB) can help ease the financial strain.

By setting up an emergency fund, securing life and income protection insurance, and consulting with a financial advisor, you can ensure your family’s financial security for the future. Remember, the key is planning ahead—small steps today can lead to big savings tomorrow.

Parenthood is about enjoying the journey, not stressing over the financial hurdles. With proper preparation, you can provide a stable and secure future for your child and enjoy every moment of this new chapter.