We've put together these 8 tips to help you prepare your finances for life's exciting (and sometimes challenging) circumstances.
September is Australia’s peak “baby time”, according the Australian Bureau of Statistics.
September 17 is the year’s busiest birth day, followed by September 23 and 24. If you’re approaching that time and “expecting”, there are some ways that soon-to-be parents can prepare for the baby bonanza, People’s Choice Spokesperson and soon to be first-time dad Stuart Symons says.
1. Build baby’s first budget
Yes, it’s boring, but a baby changes everything and you’ll need to know where the money is going, Mr Symons said.
“Before your first child it is easy to overlook the significant cost of nappies, baby food, medicine, and toys,” he said. “Budgets may be dull but they help you stay in control of your finances so you can afford the things you need. They can also give an early indication if things are slipping so you can fix things before they get out of control.”
Get your baby budget started with our Budget Planner here.
2. Ditch the debt
When you bring home a new member of the family, you can expect the unexpected – so getting rid of old debt before the big day can give you some much-needed breathing space, Mr Symons said.
“If you have credit card debt, a mortgage, or maybe a personal loan, getting a few payments ahead before the baby is due can give you flexibility as you are finding your baby feet,” he said. “If an unexpected expense crops up, you will be able to deal with it without worrying about being penalised for a late payment.”
3. Prepare for the rainy day
Another way to prepare for the unexpected is to put aside a lump sum that is only to be spent when it is really needed.
“Putting aside a set amount every week in the lead-up to the birth can give you a safety net should you need it,” Mr Symons said. “If you don’t think you have the spare cash, think about cutting back a little on your pre-baby spending spree to save for the future. Consider setting up a separate ‘rainy day’ account to reduce the temptation to spend it.”
4. Be realistic
“Having a baby doesn’t affect your mortgage calculations directly, but it probably will impact on your ability to repay one,” Mr Symons said.
“One parent might have to stop working at a time when you face higher living expenses, and then you can expect childcare costs in the months or years ahead. This may translate to being able to borrow a smaller amount or settling on a longer repayment period.”
5. Update your insurance
When you are young and healthy, insurance may seem a waste. Having a baby nearby can quickly change those calculations, Mr Symons said.
“A baby is an incredible responsibility so it’s only natural to ask questions like ‘What happens if I’m in car crash or I get seriously ill or worse’?” he said.
“Health insurance, life insurance and income protection insurance can provide some reassurance, but of course it comes at a cost and has to be budgeted for. It’s best to speak to a professional for a tailored package that fits your specific needs and can be updated as circumstances change.”
6. Cash in hand
“One of the lovely things about having a baby is that friends and relatives help celebrate with gifts,” Mr Symons said.
“If you set up a Term Deposit account before the little one arrives, you could give well-wishers the option of depositing any amount they might otherwise spend on a toy or gift. With regular contributions and the power of compound interest the account balance can really start to add up and be put to great use in the future – like a first car.”
7. Government love - tax and benefits
The Federal Government’s financial assistance can be a real help for children, parents and carers.
“One of the major benefits is Paid Parental Leave which can be paid for up to 18 weeks after the birth of a baby. But there’s also Family Tax Benefits, childcare subsidies and Partner Pay,” Mr Symons said. “A considerable amount of money can be involved so parents should go to the Department of Human Services website for more information.”
8. Retirement planning
It might seem a little odd to mention retirement planning with a new baby on the way, but time makes all the difference, Mr Symons said.
“While babies require immediate spending, you should never forget the long-term financial needs of you and your family,” he said.
“If you don’t have a retirement savings plan, then now is the best time to start. While money might be tight with a new baby, every little bit helps and the earlier you start, the more time compound interest has to work its magic.
“If a new baby means you have to temporarily cut back on an existing plan, then try to establish a timetable for you to restart those contributions. It will certainly pay off in the long-term.”
Make your money go the distance with our Budget Planner here and get back to enjoying life's precious moments.
