Financial Planning for a New Baby in Australia: What to Expect (and Budget For)

🛍️ The upfront costs of getting ready🔗

Before your baby even arrives, there's a list of gear to sort out. The range is enormous depending on whether you buy new, go secondhand, or accept hand-me-downs.

🎯 The essential: A word on car seats: these are non-negotiable under Australian safety standards (AS/NZS 1754). You can buy secondhand, but only if you can fully verify the seat's history, including that it has never been in a crash. When in doubt, buy new.

For everything else, prams, cots, clothing, bouncers, bassinets, secondhand is completely fine. Facebook Marketplace and local buy-swap-sell groups are genuinely useful here. Optional but common extras include a baby monitor, white noise machine, breast pump and bassinet. These add up, but many can be borrowed or bought secondhand.

The key message: you don't need to buy everything new, and you don't need to buy everything at once. Start with the essentials and fill in the gaps as you go.

🍼 Ongoing monthly costs once baby arrives🔗

Nappies: expect to spend around $80-$120/month on disposables. Cloth nappies have a higher upfront cost (typically $300-$600 to get set up) but dramatically lower ongoing costs, worth considering if you're planning more than one child.

Formula: if not breastfeeding, formula runs roughly $200-$350/month depending on the brand. Breastfeeding has much lower ongoing costs (nursing bras, breast pads, possibly a pump) though it comes with its own demands on time and energy.

Health costs: GP visits are typically bulk-billed for children, and immunisations are free under the National Immunisation Program. If you're considering a private birth, out-of-pocket costs can vary significantly, so check your private health insurance obstetrics cover well in advance.

Childcare deserves its own section, it's the cost most new parents underestimate. Average childcare centre fees run roughly $120-$180 per day before subsidy. Many parents assume childcare is a problem for "later," but if you're returning to work within the first year, it becomes relevant very quickly. The Child Care Subsidy (CCS) helps, the government pays a portion directly to your provider. From 5 January 2026, eligible families can access at least 72 hours of subsidised care per fortnight. Use our Child Care Subsidy calculator to work out your specific subsidy.

🏛️ Government support, what you're entitled to🔗

Parental Leave Pay (PLP) is the government's main income-replacement payment for new parents.

🎯 The essential: PLP is a flat weekly rate, not a percentage of your salary. For someone earning $80,000/year, that's roughly $3,077/fortnight before tax vs PLP's ~$2,009/fortnight before tax. The gap is real and needs to be planned for. PLP is separate from any employer-paid parental leave.

Family Tax Benefit (FTB) is an ongoing payment for families with dependent children, in two parts. FTB Part A is paid per child, means-tested on family income. The maximum rate for a child aged 0-12 is $235.48 per fortnight, the base rate is $75.60 per fortnight per child, and the annual supplement (2026-27) is up to $970.90 per eligible child, paid after year-end balancing. You get the maximum rate if your adjusted taxable income is $69,131 or less.

FTB Part B is for families with one main income, either single parents or couples where one partner earns significantly more. The maximum rate (youngest child under 5) is $200.34 per fortnight, or $139.86 per fortnight if the youngest child is 5-18. The annual supplement (2026-27) is up to $478.15 per family. You're not eligible if adjusted taxable income exceeds $124,327, and a secondary earner test also applies. Note: you can't receive FTB Part B on days Parental Leave Pay is being paid.

Newborn Upfront Payment and Newborn Supplement, linked to FTB Part A eligibility, are not taxable.

Tip: some of these payments, including Parental Leave Pay, can be claimed before the birth. Do it early to avoid delays after the baby arrives.

🏢 Employer parental leave, don't overlook it🔗

On top of the government scheme, many larger Australian employers offer their own paid parental leave, with huge variation, some offer 6 weeks at full pay, others offer 20+ weeks. Don't assume you know what your entitlement is, read the actual policy in your enterprise agreement or HR handbook.

Key things to check: how many weeks of paid leave and at what rate; can you take government PLP and employer leave consecutively (the most common arrangement); does your employer continue superannuation contributions during unpaid parental leave (valuable but easily missed, ask HR directly).

Government PLP and employer-paid leave can often be stacked, but rules vary by employer, confirm with both HR and Services Australia before planning leave.

📉 Planning for the income shift🔗

The most common financial mistake new parents make is waiting until they're on leave to figure out how to live on a reduced income. By then, it's too late to build a buffer.

Here's what to do instead:

1. Work out your household income during leave, add up government PLP plus any employer top-up.
2. Compare it to your current spending, use your last three months of bank statements, not a guess.
3. Find the gap, for most couples there is one, the question is how big and how to cover it.
4. Start living on the reduced income now, bank the difference as your baby fund.

That last step is exactly what a sinking fund is designed for, our sinking funds guide walks through how to set one up.

For couples working through how to handle the income change together, who pays what, whether to use joint accounts during leave, how to manage money when one partner earns nothing for a while, our how to split finances as a couple guide covers the practical mechanics.

✅ Your pre-baby financial checklist🔗

1. Build a baby fund. Start a dedicated sinking fund for upfront baby costs, aim to have it funded before the birth.
2. Model your leave budget. Calculate household income during leave and build a monthly budget around it, do this at least three months before your due date.
3. Check your employer's parental leave policy. Read the actual policy, ask HR specifically about super contributions during unpaid leave.
4. Apply for government payments early. Parental Leave Pay can be claimed before the birth.
5. Review your insurance. A new dependent changes your life insurance and income protection needs significantly.
6. Review private health insurance. If considering a private birth, check your obstetrics waiting period now.
7. Set up (or top up) your emergency fund. Babies bring unexpected costs, three months of expenses as a buffer is a sensible target.

🧐 3 common misconceptions about baby finances🔗

1. "Parental Leave Pay will cover our income." It won't. At $1,004.70/week before tax, PLP is well below most people's actual salary. For someone earning $80,000/year, that's roughly $3,077/fortnight before tax vs PLP's ~$2,009/fortnight. The gap is real and needs to be planned for, not discovered three weeks into leave.

2. "Childcare costs are a problem for later." Many parents return to work within 6-12 months. At $120-$180/day before subsidy, childcare costs can easily exceed a mortgage repayment. Factor this into your 12-month financial plan from day one.

3. "The income drop is temporary, we'll manage." Technically true, but "managing" without a plan often means credit card debt, depleted savings, or financial stress that strains the relationship at exactly the wrong time. A written budget for that period isn't overcautious, it's the difference between coming out the other side in good shape or not.

❓ Frequently asked questions🔗