How to keep financially healthy with a baby on the way
28/02/2017 Samantha Wang, Corporate Accountant
What does growing your family mean for you? For me, it’s a wonderful time that brings to mind thoughts of those tiny, glorious, bundles of joy that are babies.
But then, what about the financial costs?
Scans, tests, a cot, pram, nappies, monitor, car seat and more; these all cost money and often lots of it. It can be stressful to think about, but if you get your family budget in order early on, your impending costs of parenthood can be less stressful and more fulfilling over time.
With baby number two on the way in my household, this topic is front of mind so I want to share with you my top tips to staying financially fit while your family grows.
1. Consider your hospital expenses
One big thing you need to consider before you give birth is how and where you want your baby to be born. Ask yourself; who would you like to care for you? Can you afford private care? Which is better for you and the baby?
Choosing to have your baby in the public health system is the most budget friendly option; there is no charge for labour or birth care in public hospitals. Your birth will be attended by a midwife or the obstetrician on duty, and all costs are covered by Medicare.
With this option, the costs to watch out for are potential out-of-pocket expenses during your post-birth hospital stay, such as use of the hospital’s disposable nappies, or costs for pregnancy care provided by your local GP who doesn’t bulk bill.
If you choose a private obstetrician in a private or public hospital, private health cover is strongly recommended.
The costs of your care under the private system will vary greatly depending on a number of different factors, so it’s best to do your research into what these may be based on your ideal birth plan.
It’s worth double checking with your health fund before you get pregnant to see what exactly your policy covers. Remember that most policies have a qualifying waiting period of 12 months, so it’s best to plan ahead and make sure these options are added at least one full year before you conceive. And watch out for “gap” costs (the shortfall between your policy coverage and the charged cost of a service) that you may have to pay for things like obstetrician appointments.
2. Are you ready for two to become one? Managing your income during maternity leave
Mothers-to-be, who are often in the peak of their earning career, have to stop work to look after their tiny human.
Will your family be able to adjust to dropping to a single income stream?
It can be a big adjustment, so here a few things you can do to make the adjustment as painless as possible.
Prepare a plan
Crunching the numbers to determine how much it costs to live safely in the suburbs, turn the lights on and keep the cat warm can be scary, but it will ensure your money stretches further.
Work out your household expenses and how much you need to sock away for food, mortgage or rental payments, car and bills. A detailed budget can really benefit your bottom line.
Allocate some of your hard-earned money to savings. And by savings, I mean money that you can’t touch until baby is born. This is your buffer behind you for emergencies.
You have about nine months from the time that you find out you’re pregnant until the time you welcome your new arrival, so start putting money aside while you have two income streams coming in. Set up a high interest savings account and be disciplined with how much you regularly contribute.
Learn to spend less
Scaling from two incomes to one could be dangerous if your spending habits remain the same despite your reduced income.
Get on board with finding new ways to save money.
Use websites to track when fuel is cheapest and only fill up on those days. Sign up for direct debit on your bills to get discounted rates. Look closely at your home loan and negotiate with the bank for a lower interest rate. Move to a cheaper suburb further from the city to save rent.
While you’re at it – get rid of your credit cards. It’s easy to fall into the trap of spending more than you earn if you pay with credit cards; you’re less likely to keep track of your spending and before you know it you’ve spent away your rent without even noticing. Cold, hard cash is a lot harder to spend. Paying in cash will reduce temptation and ensure you avoid making extra monthly credit card repayments to the bank.
Know your entitlements: Government help and employer subsidised Paid Parental Leave (PPL)
You could be eligible for government benefits such as Parental Leave Pay, a scheme in which you will be provided with minimum weekly wages up to 18 weeks if your income is less than $150,000 per annum.
Depending on your income and assets, you may also be entitled to other benefits such as the Child Care Benefit, Family Tax Benefit, Parenting Payment or a Health Care Card.
You might also be able to access to employer-paid PPL through industrial awards, or individual employment contracts. It’s well worth checking what you’re entitled to and incorporating these benefits into your budgeting.
3. Thinking ahead - child care and school fees
Now that you’ve started thinking about the initial costs of having children, it’s worth looking ahead.
If you intend to return to work and reinstate your dual income lifestyle, childcare is a hot topic –especially considering how important quality care is for the development of a child. Not only will you need to consider how difficult it is to find a placement in your preferred location, you’ll need to work out how much will it cost.
From nannies to day care facilities, childcare costs vary depending on where you live, what type of childcare you choose and how many hours a week your child will spend in childcare.
When it comes time to go back to work, you’ll need to revisit your budget and factor changes to your income along with the added expense of professional child care services. This will help you decide whether or not returning to work will financially benefit you.
And then comes school.
The reality is children only get more expensive the older they get, when education, transport, school excursions and sporting costs really start to take centre stage in a big way.
In fact, John Velegrinis, chief executive of the Australian Scholarships Group, says parents need to start planning school related finances from the day a baby is born.
If you opt to put your children in private school, school fees could take a large slice of your total income pie each year. That’s even before you consider the costs of soccer/ballet/chess classes, pens and paper, school shoes and backpacks.
The good news is that you’ve got a bit of time to plan for these larger ongoing expenses, so there is no need to fear! The earlier you get on board with applying a strategy to your financial future, the better off you’ll be in the long run.
Remember – while it can be scary to think about all these expenses, growing your family should be a time of joy and excitement. You also don’t have to look at the bigger picture alone. Talk with your family about their experiences and don’t be afraid to ask for help when you need it.
And if you would like professional advice, why not consider speaking to The Hopkins Group? Family is really important to us, and our team is experienced in providing advice in a number of areas including budgeting, financial planning, personal insurances such as life insurance and income protection, and estate planning. We can even help you get a loan for the big car you’ll need to fit all those kids you’re planning on having! Contact our team today.
General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.
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