Babies and your finances
June 12th, 2019
Having a baby for the first (or any!) time can be a very daunting experience. From thinking about the experience of having the baby itself to dealing with sleep deprivation to learning how to parent, there is a myriad of uncertainties and surprises when such a huge change is coming your way. And the fears can be ranging for both the mother and father to be.
One element that can significantly concern parents-to-be is the financial aspect of having a baby. Will one parent stop work for a period of time? And if so, for how long? How much will child care cost? Are there grandparents or family available to help? Private or public school? Can I go on holidays? What do I need to buy and what is going to be a waste of money?
While every person and situation varies, I have found some of the following tips helpful when planning for your new addition to the family.
Start to reduce your income immediately
If you plan for one parent to be a stay at home mum/dad, a great way to not only build up some savings but also start understanding the financial impact of that situation is to stop using that income during pregnancy and put it all into savings. It may sound extreme but it is a great way to quickly gather an understanding of how it feels to live in that situation. That money might then be used as an income supplement once bubs comes along, for purchasing significant items or be held in savings for a rainy day.
Utilise the government assistance payments available to you
Most individuals are eligible for at least some income or benefit from Centrelink. Most payments are means-tested but it is worth ensuring you are registered with Centrelink (this may involve going into a Centrelink office to be initially identified) and completing their online applications (for both parents). Depending on your individual situation, the primary stay-at-home parent may receive 18 weeks of payments. The secondary parent can receive 2 weeks of payments if they decide to take time off of work plus additional payments such as child care subsidy and Family Tax A and B payments can be claimed also. At the end of the day, it is worth at least applying – you may be pleasantly surprised at what you receive.
Also ensure you register for the Medicare Safety Net. Once you spend over a certain amount in one calendar year on out of pocket medical expenses, if registered, you may receive a higher Medicare rebate on all eligible bills for that year.
Prepare yourself… for private care costs
Done “the right thing” and gotten yourself private hospital cover? Speaking from personal experience, the care you experience under private hospital cover is worth every cent. Other people would definitely disagree. It’s a personal choice but if you do choose to go down the private hospital path, ensure you go in fully aware. Generally, none of the upcoming appointments are covered by your private health insurance. You will most likely pay the gap after Medicare for all of your obstetrician appointments, scans etc. Then depending on your cover level, you may pay a gap for being admitted to hospital and sometimes a gap for each day you spend in hospital. You will often receive a bill down the track for items such as an anaesthetist (hello, last minute epidural!) or paediatrician consultations during the hospital stay.
Lose the credit card debt
If you use a credit card like most people, something important to focus on is getting on top of your credit card debt. I personally have a credit card but here’s the beauty… I make it work for me. Our card gives us points and we accumulate the points to redeem for gift vouchers. Basically, we don’t pay a cent to use our credit card and in fact, get paid to use it. We use our credit card for every expense possible and then pay it off in full every month. If you think you are the kind of person that can manage their budget to ensure you spend within your means on your credit card, go for it. BUT if you can’t see yourself having the discipline, lose it. Check out our blog post about credit cards here.
Ensure you update your insurance
If you are taking leave for the new baby’s arrival and hold an income protection policy, make sure you speak to us about the option of placing your policy premiums on hold for the leave period. This way you aren’t paying premiums unnecessarily but are able to retain your policy.
Plan your return to work, and be realistic
Work out how long you can afford to be off of work and plan for it. For some, they have the luxury of the choice to have one parent not working until the child/children are at school age, for others, 3 months is absolute maximum their family can afford to lose an income. Ensure you communicate with your workplace about your plans and their expectations. Think about how you are going to logistically manage being back at work with your little one. Which care option suits your budget and parenting style? I have come across a lot of people who have changed their plans once the baby has come along. For some, going back to work as planned wasn’t an option due to reasons such as the baby had health issues/multiple births/their care option wasn’t viable/they didn’t feel ready to leave the baby/they thought they wouldn’t want to go back to work but they changed their mind. Try and be realistic in your planning and remember, babies and children don’t always conveniently work around our schedules…. Often we have to make big changes in our life to work around them and their needs!
Let your loved ones throw you a baby shower
I’ve had friends who have said, “oh I don’t want everyone to fuss over me. Don’t worry about a baby shower”. But I always insist! It’s something that your nearest and dearest love doing for you and truly, don’t underestimate the useful gifts you will receive. This sounds like a horrible money-grubbing exercise, but embrace it! People love picking out sweet little things for your unborn child and it generally means you end up with most of what you will need (and then some) for baby. I personally held off buying most of the things I thought I would need until after my baby shower. I was definitely overcome with the generosity that was showed on me and thankfully, because I did wait, it meant that we only had a to purchase a few additional, big ticket items. It not only saved money but also saved on ending up with too much “stuff”.
Don’t underestimate the value of hand me downs
As previously mentioned, people really do love getting your little bub something. The gifts don’t stop coming – once baby arrives many people love to bring another gift. I had some friends ask me what I needed (and generally my answer was, “nothing. Honestly!!”) but I did find that the weather was colder than I thought it would be for the time of year my daughter was born. So when a couple of friends asked if I needed any baby clothes that they had used for their own little ones, I jumped at the chance. It meant I was able to access what I needed without having to spend more and was able to return the items once my daughter grew out of them (meaning I didn’t end up with so many left over clothes!). Toys is another great hand me down item. The countless things that have gone back and forth between my sister-in-law and I! Walkers, high chairs, change table, toys…. So many of these things are made so well and it’s great to offload bulky items once they’re not needed (try storing a baby walker in the wardrobe… impossible!). You also get a nice big tick in the environmental stakes - reduce, reuse, recycle!!
Don’t go crazy with gadgets and “have to buy” items
You are having a baby, not having a lobotomy (honestly). Once the baby is born, the shops will still be there, the internet will still be there…. Don’t feel like you have to buy every single baby gadget that has been invented. The amount of people that I have spoken to that bought a breast pump that they used once or twice (see ya later $300) or some “must have” gadget that did not suit their child. I suggest making sure you have the essentials (somewhere for the baby to sleep, be changed and bathed, etc.) and then waiting to see what you need once the baby comes along. Newborns don’t sit in highchairs! Unless you’ve been given one as a gift or hand-me-down, wait until your baby is almost ready. If you can’t drive to the shop or don’t feel ready, send your spouse or someone offering help to get something you need. Online ordering is also a godsend. I used to order nappies and various items in the middle of the night during feeds! Whatever works for you…. There is no right or wrong. Just whatever works for you.
Have a realistic budget
Not a fun exercise but this is a MUST for all families! Create, assess, reassess. Stay on top of your budget and be honest! That way you can spend with confidence.
If any of the above points have triggered some questions or ideas, please click the Book Me In button to make a time to meet with one of our advisers.
Disclaimer:
This advice is general advice only and has been prepared without taking account of your objectives, financial situation or needs; and because of that you should, before acting on the advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs.
