Financially preparing for a baby

So you want to have a baby. Congratulations, life is about to get very real! This is an exciting time emotionally but it can be a challenging time financially. You have probably both been working full time and are now wondering how you will survive on one wage (with increased expenses!)

 

 

It may sound obvious but you need to build up a buffer account. The size of this account will depend on your current expenses, how long you plan to have off work and what portion of your earnings you wish to cover. Regardless of these numbers, it is important to start saving now. Do not put this off for even one more day – get into this habit now! The sooner you start to save more and spend less, the better off you will be.

You should give some thought to the costs associated with birth, hopefully you have already upgraded your private health cover to include pregnancy and given some thought on whether you shall give birth as a public patient or have your own obstetrician and go private. This could add a further $5K to your expenses.

The next thing to consider is how long to take off work and what about childcare. Will you plan to go back to work, do you have family that can help with childcare? If not you could be paying anywhere between $80-$180 per day for childcare. This expense is enormous. For those renting you may even want to consider moving location, you could save $100 a week on rent and a further $40 a day on childcare in more suburban areas a little further out from the CBD.

For some couples government assistance may be available in the form of the Newborn Supplement and family tax benefit part A or B however there are tight eligibility requirements for these benefits. Paid parental leave may also be available, again check your eligibility with the Department of Human Services.

Once your bundle of joy has safely arrived you should seriously consider your need for personal insurance (income protection, life insurance etc). Yes, the budget will be under strain but there are options available to assist affordability and you now have an extra someone totally reliant on you and your ability to earn an income.

Give some thought to saving for their education also as this can be a large expense for some families. Being financially prepared will greatly assist you to enjoy this special time as you embark on one of life’s greatest adventures – parenthood!

General Advice warning: This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial adviser before making any investment decisions.