by Betsy Westcott of Ladies Finance Club
Arriving at the decision to start a family is an exciting time for many individuals and couples. There’s absolutely a lot to think about from prenatal vitamins, to birth plans, where to live, how to approach parenthood and, of course, the financial impact.
I don’t know whether it’s just my stage of life or a result of idle time at home thanks to COVID19 lockdowns but there’s definitely be a spike in baby announcements in my social circle be it with friends, family or clients and I’m thrilled for each and every one of you!
So I dedicate this blog to all those out there thinking about starting a family, those that have recently conceived and for those reading this bleary-eyed but full of love as they sip on their morning coffee cradling their little bindle of joy! Here’s thirteen things you can do to financially prepare to start a family.
Review and set up personal insurance
Personal insurance broadly refers to insurance policies like Life, Total & Permanent Disability, Trauma and Income Protection Insurance. Depending on your personal situation and preferences you may wish to take out all of these or just a combination. Working with a suitably qualified professional like an insurance broker is a good idea. You don’t pay them for the service as they receive a commission from the insurance provider and they’ll help you navigate the various types of insurances, insurance providers and definitions. Even after working in finance for over a decade I still opt to use a broker when reviewing and setting up my insurances.
Earlier this year, I reviewed my personal insurances with the help of Marnie Maloney. She’s an insurance broker located here in Sydney as she was fantastic to work with. Marnie says that ‘If you are thinking about starting a family it’s a good idea to consider insurance options before you get pregnant or when you are in the first trimester. Insurers are more willing now than they have ever been to provide protection to pregnant women. While applying for life cover and trauma insurance is largely the same regardless of whether you are pregnant or not, provided you have had no complications in pregnancy previously, total and permanent disability cover and income protection may be impacted depending on how far along you are into your pregnancy and what your plans are with returning to work’.
Review your health insurance
It’s time to read the fine print on your health insurance because not all policies cover pregnancy, hospital or baby related health expenses. If you do need to look for a new policy make sure you shop around before you conceive as there is often a waiting period before you will be eligible to make a claim.
Have a money conversation with your partner
Having a baby is a big decision as bringing a new life into the world will not only change your lifestyle but also your finances. Chatting about money can be a little emotionally charged so approach it with the mindset that you are a team and show both compassion and curiosity toward your partner. Discuss what kind of parents you want to be, who will work, what kind of childcare arrangements you would like and what your schooling preferences are. If you’re struggling to do this yourselves or need some help planning the financial aspects of raising a family, consider talking to a financial advisor or coach.
Consider the up front & ongoing costs of having a baby
I would suggest doing some research on the upfront and ongoing costs of having a baby. There’s the doctor’s bills, test and ultrasound bills, health insurance, birthing classes, maternity clothes before the baby arrives. There’s also the cost of giving birth which can vary significantly depending if you go to a public or private hospital. Then there is the cots, prams, clothes, bottles, nappies and more. The best thing to do is chat to other parents about the real cost of having a baby. You can save money by buying second hand items, renting or borrowing big items like prams or car seats and you could always sell items as your baby grows out of them.
Try to get ahead of or clear any debts
The chances are that when the baby arrives there will be a period of reduced income for the household. It’s for this reason you want to either get ahead on your loan repayments or pay off any debts. By doing so, you're reducing the repayments you have to make in the future when the baby arrives. Having less financial commitments means that you will be able to get by on less income. To do this start by writing down all your debts including the interest rate & minimum repayment. Checkout if any of your debts offer a repayment holiday when you’re ahead of repayments. Review your budget and determine what extra cash you can direct toward your debts to either pay them off completely or get a head on repayments. As always, consult a financial counsellor or financial advisor if you need some help doing this.
Research your workplace’s parental leave policy
It’s time to check out what paid or unpaid parental leave is on offer in your workplace. Both parents should do this as many companies will offer it to either parent. When you’re ready, speak to your employer to understand what support they have in place. You may also be able to take holiday or long service leave as well. Another great website for further reading is the Supporting Working Parents website which has a range of handy guides and tips.
Read up on government benefits you may be entitled to
First up, there’s the government’s paid parental scheme. Essentially, eligible working parents can receive up to 18 weeks of pay at the national minimum wage. The extra good news is that these payments can be received in addition to the parental leave your receive from your workplace. Check out the Department of Human Services to find out more.
In addition to this, there’s benefits such as Dad & Partner Pay which pays up to two weeks of income. Some families will be eligible for the family tax benefit which helps manage the costs of raising children. If you weren’t working before your baby arrived, then you may also be eligible for the newborn upfront payment.
Build up your emergency fund
Plan for the unexpected and that includes unexpected expenses. According to research from Commonwealth Bank, 1 in 3 Australian Households couldn’t access $1000 in an emergency leaving them incredibly financially vulnerable. Emergencies savings are the ‘ride or die’ friend of your finances. Always with you and ready to get you out of a tight spot. Start by savings $1000 in a fee free, high interest savings account. If you can, keep savings until you have the equivalent of 3-6 months worth of living expenses in there.
Start reading up on childcare costs & possibly register with a centre
Whilst it may seem a while off yet, it’s a good idea to start looking at child care options during your pregnancy. You can get started by looking at long day care centres in your local area, family day care centres, nannies & occasional care providers or talking to family about caring options. Start with your old pal google to see what’s available locally. You can stop by centres to grab a brochure and even request to look at the facilities. Again, see if your workplace is affiliated with a local child care centre. You may even be able to salary sacrifice your child care fees. Don’t be shy about chatting to friends with children and asking around for recommendations. Once you’ve done your research, create a short list of choices. You definitely want to make a decision at least a few months before you return to work. In metro areas, it can be tough competition getting into some centres so put your name on the waiting list as soon as you can.
Update your Will
Studies show that at least 45% of Australians don’t have a valid will. A will is a written legal document that sets out how you wish for your assets to be distributed when you die. In addition to this, “a will can include who you would like to be guardians of your children” says Chad Penfold, Director of LawRep. Updating your will once your baby arrives “gives parents comfort in knowing that their little ones will be well looked after should the worst happen” advises Penfold. For a will to be valid, it needs to be in writing, signed by the will maker and in the presence of two witnesses who also sign the will. Preparing a will need not cost the earth as there are a range of options available. You can pick up a Will Kit from your local Post Office, seek assistance from the State Trustees (i.e. NSW Trustee and Guardians) or with the help of a Solicitor.
Keep funding your retirement
Find out if your workplace will continue to pay your superannuation whilst you’re on parental leave. It’s not common for companies to do this but some may. If they don’t, consider if you can continue to make contributions to your superannuation or perhaps make extra ones whilst you’re still working to keep your retirement plans on track.
Add your child to your health insurance
If you have Private Health insurance, the good news is that upgrading to a family benefit to cover your children is fairly straightforward. Just be mindful that there may be additional rules, restrictions and waiting periods to observe. Take the time to read the product disclosure statement carefully or call the fund directly for assistance. Each fund is slightly different so you may want to shop around to find the right one for you.
Look for cover that provides hospital cover and medical treatments that your child may need. You want cover that’s going to cover you for a wide range of benefits as your child grows such as broken bones, removing tonsils and appendix. Extras cover like dental and optometry may also be beneficial too. Most health insurers will let you cover your child until at least the age of 18, sometimes longer.
Consider starting a fund for your child or their education
Many parents want to give their child a head start in life. Saving and investing on behalf of your child can be a great way to build up a fund either for education or a future home deposit or maybe it’s money for their first car. There’s a plethora of ways you can do this - high interest savings accounts, insurance bonds, managed funds are just a few options. What’s most important is to think about who’s name the investment is going to be in as this will identify how tax on the income earned by the investment will be paid. Chat to an accountant or financial advisor about the options available to you. Given cash interest rates are so low, it’s worth exploring what alternative investment options are available.
A special shout out to my cousin, Ange, for being my baby mamma muse and letting my use your photos in the this article.