Echoing @Nimloth, there's tons of reasons to reuse the clothes. You just need to take the proper steps to clean them.
My aunt had six children and not as much income. She would take the baby clothes out, repair by hand any damage, and throughly clean and disinfect them using bleach (I remember the distinctive sodium hipochlorite smell) and laying them inside a plastic bag under the sun for a whole day. The next day she'd put the clothes in a regular wash, soften, and iron cycle. I am not advocating the use of the same materials she did though. There are friendlier ways to disinfect nowadays. Hipochlorite is rather aggressive.
If the clothes are clean and without mold or any contaminant, there's no reason to not use them.
Reusing the clothes is environmental friendly, economical, and character-building, I guess. She had a collection of pictures of all six cousins with the same clothes at the same relative age.