In Ethiopia approximately 3,200,000 babies are born annually and 41.09 per 10,000 live births are affected by spina bifida. Hydrocephalus (HCP) is another common pediatric neurosurgical condition with studies in Ethiopia showing the most common etiology is post spina bifida closure. The out-of-pocket expense (OOPE) and indirect expense of patients treated surgically for spina bifida and hydrocephalus during the first year of life were assessed. A prospective hospital-based study was done on patients treated surgically for spina bifida and HCP in two university-affiliated hospitals, between April 1st, 2022, and April 1st, 2023. Data on direct and indirect expenses were collected during inpatient care and follow-up. Catastrophic health expenditure (CHE) was assessed, defined as total expenditure exceeding 10% of the total annual household expenditure. A total of 245 patients were eligible for analysis. The median annual total expenditure of households for treatment was ETB 11,510.00 with ETB 5700.00 being indirect expenditure. Forty-nine percent of the households suffered CHE. In multivariate analysis, the factors which were found to have a statistically significant association with CHE were the hospital where the patient received the treatment, the household's wealth quintile, the place of residency, and pre-admission duration of stay. Our study revealed a high CHE in households with spina bifida and HCP. We recommend working on primary prevention of spina bifida, expanding surgical services regionally to minimize costs associated with travel for surgical care, and reducing pre-admission duration of stay by improving evaluation and investigations at outpatient clinics.