Researchers at Oxford University's Health Economics Research Centre found if more research was done to delay premature births by just one week,£260m could be saved every year.
The cost was based on the needs of premature babies born in 2006 for specialist neonatal healthcare, hospital readmissions, outpatient visits, special educational needs and the role of social services, up to the age of 18.
The study found premature babies on average cost one-and-a-half times more than an infant born at full term, with 90% of these costs incurred while the baby is still in hospital.
The baby charity Tommy's, which funded the research, said the cost is set to increase as the number of premature births continues to rise.
Jane Brewin, chief executive of Tommy's, said: "Given that the UK rate of premature is rising, this mammoth cost is set to grow even larger.
"A plan must be developed which will target medical research resources to reduce premature birth."
Figures show the number of babies born prematurely in England in November last year had risen to more than 8% of all babies after remaining at 7% for the previous 15 years.