Russell Ward Finance Writer
Having a baby can be one of the most exciting times of your life and it can also be one of the most financially challenging. The last thing you want to think about is the money aspect of having children but it’s important to consider this when having a bub. Here are six ways to be financially prepared for a baby.
1. Consider the costs and budget for your baby
If you’ve got a baby on the way, there will be a range of immediate and ongoing costs to save for, including the baby’s room (cot and change table), food and bottles (that could include formula), clothes and nappies, car seats, strollers, childcare and more. You should create a budget to consider current household expenses and future baby-related expenses. Start budgeting and saving now, then put yourself in control of your expenses when the time comes.
2. Try to clear any outstanding debt
The cost of having a baby can be enough to deal with and the last thing you need to worry about is outstanding debt that needs to be paid. Prior to the baby’s arrival, either consolidate your existing debt or try to clear the most expensive debt first. Consider applying for a personal loan to help manage your expenses or opt for the ‘family pause’ aspect of your home loan– by which you can place a short pause on your loan repayments.
3. Sort out your health and life insurance
Check your health insurance, as not all plans cover pregnancy- or hospital- and baby-related expenses. You might need to raise your level of cover or shop around for a new insurer – and you’ll likely need to do this in advance of falling pregnant. Also, look at life insurance options that will cover your family’s financial needs and ensure their quality of life should an unexpected event occur.
4. Get on top of future medical costs
Not only will you have baby-related expenses but there will be certain medical costs that you won’t be able to avoid for both you and the baby. So, try to understand what those costs may be, such as hospital and doctor bills, tests and scans, plus medical and pharmacy costs, and work these into your baby budget.
5. Understand your entitlements
You could be eligible for the government’s paid parental scheme and/or any equivalent scheme that your employer provides, which could include paid and unpaid parental leave entitlements. Find out what schemes are available at your place of work, including any leave allowances (annual, long service, etc.) that you might be entitled to. Also, see if you are eligible for any ongoing government benefits and payments available to families once the baby is born, such as the childcare benefit or rebate schemes.
6. Plan for extended parental leave
Although you may have some parental leave entitlement, you might also want to take a longer period off work than is covered. If so, explore ASIC MoneySmart’s parental leave calculator that shows you what to expect in terms of income during your parental leave so that you can plan your savings accordingly, especially if your family will be living on just one salary.