Survive Parenthood (Financially!)
The arrival of a new child, especially the first one, brings great happiness, excitement, but also a lot of change – especially if it means you suddenly have to rely on only one income to provide for a larger family. Figures from the latest NATSEM (University of Canberra) Income and Wealth Report show that for a typical middle-class Australian family, the cost of raising two children from birth to adulthood was $812,000 in 2012.
So what exactly can you do to prepare beforehand that when the time comes, you can just enjoy your new family member and not worry about finances?
Prepare, prepare, prepare
Take advantage of the many benefits provided by your employer and the government, designed to assist you when transitioning to becoming a new parent. From Paid Parental Leave to Family Tax Benefits, good preparation can avoid future stress before the baby arrives. This checklist from the Department of Human Services should give you a good indication of what you’re entitled to. Also check with your employer if you’ll be entitled to any maternity leave benefits.
Know and understand your spending habits and your budget – this should enable you to cut back on unnecessary spending to free up extra finances to put towards the new family addition – setting up a baby room with all the necessities can be quite expensive.
Plan for the future – how will ongoing bills be paid once one of you stop work? How long will one/both of you be at home? Prepare a rough budget to ensure you know how expenses will be covered, especially in the early months. If needed, start saving as early as possible if you need to put money away for this period. This will take away a large portion of stress during the initial sleep-deprived stage of parenthood.
Assess Childcare Options and Costs
If both parents need/want to return to work, it would be a good idea to assess your childcare options in your area as the majority of childcare centers have waiting lists of roughly 12 months – and a number of options exists (eg. nannies, family daycare, long day care). Also ensure you understand the costs, benefits and disadvantages associated with each option.
The increasing cost of childcare in Australia also means it can be a balancing act between choosing to stay home with your child or returning to work. In some cases your income when returning to work may only just cover the out-of-pocket expense of childcare. Evaluate the different options that makes sense to your personal situation and budget.
Plan for the Unforeseen
Ensure your family is protected from unforeseen events such as unexpected death, serious illness or injury. A personalised insurance policy should provide financial assistance to cover household debts and mortgage repayments should something happen to the main income earner.
Save for the Future
Education is one of the greatest gifts we give our children and generally becomes a more important factor as the kids grow up. If you can afford it, regular contributions to a separate savings account, even if small initially, will provide additional funds for education when the time comes.
Enjoy the Moment
Lastly – enjoy every moment! Before you know it, it will be in the past.
MK Wealth Solutions is a Corporate Authorised Representative No 100223 of Synchron ABN 33 007 207 650 AFSL 243313. The information provided in this article has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your personal financial adviser before you make any decision regarding any products mentioned in this article. Whilst care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither MK Wealth Solutions and Synchron, nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.