If you’ve been thinking about growing your family to 3 (or, perhaps you have a tiny bun already on the way!), you want to prepare yourselves accordingly. Babies are an exciting part of your life, but, they can also be expensive!
Recent research suggests it can cost an average $144 a week to raise a child between zero and four. Sadly, that doesn’t include childcare. So, what can you do to ensure you’re financially prepared?
Upfront Costs to Consider
The costs of having a baby kick in before you’ve even had it. In addition to out-of-pocket medical costs, private health insurance, tests, and birthing classes, there are a few other costs that will add up quickly:
- Maternity clothes
- Baby clothes
- Furniture; baby’s cot, change table, mattress & linen
- Transportation; car seat and pram
- Bottles, pumping machines, formula.
First 12 Months’ Costs to Consider
It doesn’t end once the baby’s born, either:
- Time off work. Although not technically an expense – it will put a dint in your cash flow.
- Child care – depending how soon you’ll be returning to work.
- More clothes!
- Medicine and health care.
It’s a list that keeps on giving. Although it may seem overwhelming at first, there are a few things you can do to financially prepare and set you and your family up for a more financially secure future.
6 Financial Tips to Help You Prepare for a Baby
1. Work out your pre-baby and post-baby budget
Having a baby usually means a loss of household income. It’s important you don’t get caught out by known expenses by putting a realistic budget together before you take the time off work. The earlier you can start preparing and putting money away, the better your financial health will be once bub arrives. Do a fact check on employer entitlements and factor this into your budget, too.
Having a budget in place is also great because it stops you from buying everything all at once (as exciting as it is!), you will have at least 9 months to prepare so instead of having a large some of money come out all at once, your budget will help you spread the costs out.
2. Reduce Your Bad Debts
I talk about bad debts a lot – but, it’s only because they really are that bad for you. Personal loans and credit card fees drag you down. Lighten up your financial load, and focus on clearing debts first. I can help you consolidate your debts and regain control.
3. Build a Healthy Emergency Fund
Make sure you save enough money for an emergency fund to cover you for unexpected life events! While you’re on a reduced income – you don’t want to be caught out with no emergency cash available to get you through. Aim for 6 – 8 months of general living expenses to cover you.
4. Create a Baby Fund
In addition to your household emergency fund, you should also create a baby fund. There will always be unknown expenses associated with children – you want to be financially secure and assured you can cover all costs. Caesareans, emergency hospital care, medicines – even just to cover the additional general costs like clothes, nappies, and food when times get tough.
5. Buy Second-Hand
How much of what you need can be borrowed or bought second hand? You might not be keen on second hand rompers, but, you can get some great second-hand furniture in top nick at a fraction of retail price. Ask around with friends and family first, and get savvy with your online shopping for super discounts.
6. Consider a Minimalist Approach
The thing with babies is, as soon as you have one, you’re lumped with a lot of parent’s (mostly mother’s) guilt. If Jane down the street just bought the top of the range Bug-a-Boo doesn’t mean you need it too. There’s a temptation to buy all this ‘stuff’. Only buy what you really need. And, try not to buy new if it can be avoided.
Start Preparing Now
Start putting money away for your emergency fund and baby fund as soon as possible to allow enough time to build up your safety net. Once you have your budget in place, and you know how much you need and by when, you can work backwards to start your savings plan.
Talk to me if you need help setting up a realistic budget.