How do you financially prepare for the newest addition to your family?
Recent cuts to the Baby Bonus to $3000 for subsequent children means forward financial planning for growing Australian families is more important than ever.
A tiny bundle of joy means a number of financial commitments for at least eighteen years. On top of rent or mortgage repayments and the increasing cost of living, having children will change the size of your disposable budget considerably.
Here are some valuable tips to plan ahead before your baby arrives.
Get used to one wage
A new addition to your family will most likely mean reverting to one wage for a period of time. If you are planning for a child, try to live off one income in the lead up to the birth of your child. The second income can be put into a savings account during this one income ‘trial’, and the savings can be used when your bundle of joy arrives.
You can earn interest on your savings with a high rate savings account like the one from ING Savings Maximser. They're free to own and they accumulate compound interest paid monthly so you can easily watch your savings grow with your belly at the same time. Compare high rate savings accounts at Moneyhound today.
If you are having difficulty with your finances at the end of each month during this one wage trial, this is an indication you will need to revisit your budget and your expenses.
Kick the plastic habit
Living off a credit card is already stressful without a child in the picture. Use lay-buy options to pay off purchases instead of using credit. If you are prone to using your credit card for impulse buys, try leaving your credit card at home when shopping.
Related: How to avoid money coming between you and your partner
Budget, budget, budget
To form a budget, compare your weekly expenses against your current income. This should include essentials like rent, home loan repayments, travel expenses and utility bills. If you already have children, don't forget to factor in their financial needs as well such as school fees.
If you’re unsure of where your money is going, track your spending for two weeks and identify areas where you can comfortably cut back in order to reach a savings goal.
Track your spending for two weeks if you're not sure where your money is going and identify areas where you can comfortably cut back in order to reach a saving goal. And don't forget to factor in additional expenses once your baby arrives. It helps to set aside money in advance from your second wage to prepare for these costs.
Related: How to teach kids good money habits and fiscal responsibility
Investigate private health insurance
If private health cover is important to you, make sure you sign up for a policy before you become pregnant. Most funds require you to have been a member for 12 months before you can start claiming pregnancy benefits (obstetrics). You also need to add your newborn to an existing policy before they arrive.
Prioritise baby expenses
Parenting books and a quick chat with family and friends can tell you what essential baby items you will need and which ones you can afford to skip. Likewise, you can reduce costs by opting for second-hand purchases where possible. Compare new prices to those at online auction houses, classifieds and garage sales. There's also sure to take pre-loved gear and garments from relatives waiting to be grabbed.
Related: How to avoid living paycheque to paycheque
Look into benefits
You may be eligible for the government's Baby Bonus. Parents cannot receive both the Baby Bonus and Parental Leave Pay, so use the Paid Parental Leave estimator to work out which benefit is the better option for you. There are also work-related benefits such as annual or long-service leave that you may be able to use.
Parenthood is one of the most amazing experiences of your life. Budget earlier so you can spend less time worrying about your finances and more time with your new family.
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