Invasive pneumococcal disease (IPD) and pneumonia are the major causes of morbidity and deaths in children in the world. The management of IPD and pneumonia is an important economic burden on healthcare systems and families. The aim of this study was to assess the economic burden of IPD and pneumonia among younger children in Taiwan. We used a cost-illness approach to identify the cost categories for analysis in this study according to various perspectives. We obtained data of admission, outpatient, and emergency department visit data from the National Health Insurance Research (NHIR) database for children <5 y of age between January 2008 and December 2008. A prospective survey was administered to the families of patients to obtain detailed personal costs. All costs are presented in US dollars and were estimated by extrapolating 2008 cost data to 2013 price levels. We estimated the number of pneumococcal disease cases that were averted if the PCV-13 vaccine had been available in 2008. The total annual social and hospital costs for IPD were US $4.3 million and US $926,000, respectively. The total annual social and hospital costs for pneumonia were US $150 million and US $17 million, respectively. On average, families spent US $653 or US $218 when their child was diagnosed with IPD or pneumonia, respectively. This cost is approximately 27%-81% of the monthly salary of an unskilled worker. In conclusion, a safe and effective pediatric pneumococcal vaccine is needed to reduce the economic burden caused by pneumococcal infection.