Preparing for a new arrival

Women & Finance Series

Be financially prepared for your new arrival

When you're having a baby it's normal to focus on the practical aspects of preparing for the arrival of a newborn. In fact, there are so many things to consider that people often overlook the financial considerations. By taking the time to consider your finances ahead of time, you'll be able to avoid financial pressures and really enjoy the special time with your new family member.

1. Expenses associated with having a child

The expression 'the best things in life are free' doesn't ring true where babies are concerned, because even though starting a family is likely to be one of the best things you experience in your life, it certainly isn't free.

• Hospital costs: If you choose to give birth in a private hospital, the average total cost is $9,421.*

• Set-up costs: Setting up your home to accommodate a baby requires many new items such as cots, car seats, capsules, stair rails, high chairs, prams, etc. The good thing about these items is that you don't necessarily need everything on day one which allows you to shop around. You can also keep costs down by buying second-hand or borrowing items from family or friends.

• Living costs: The average cost of raising a child between the ages of 0–4 is $7,500 per annum.** This equates to an extra $144 per week to look after your baby.

• Childcare costs: If you plan to return to work and don't have family around who are willing or able to babysit for you, you will have to use childcare. There are a number of different childcare options to choose from but the average childcare fees are more than $100 per day.^

Tips on managing expenses

  • Try to save enough beforehand to cover pregnancy costs and living expenses during your maternity leave
  • Think of different ways to cut your current levels of spending, such as eating out less often, to reduce the strain on your cashflow
  • Think of ways of generating extra cash for baby expenses, such as selling items you don't need or no longer use
  • Before buying baby items, work out which are essentials and which are nice to haves.

2. Changes to income levels

If you, or your partner, are planning to take time off work after the birth of your baby, you need to adjust to changes in the level of household income. To prepare, you should gradually adjust your budget to live off one salary. Some employers offer paid maternity or parental leave, so it's worthwhile taking a look at your employment contract or talking to a human resources representative at your place of work to determine what paid leave you may be entitled to. The length of time that you need to live off one income depends on how long you plan to take off work. For example, will you return in 3, 6 or 12 months in a full time or part time capacity?

3. Financial assistance ^^

With extra expenses on the way and a drop in income expected, it's comforting to know that you may be entitled to various forms of financial assistance through the government. There are a number of different methods of assistance available to support parents with costs of raising a child, such as:

• Parenting Payment
• Paid parental leave
• Family Tax Benefit
• Child Care Benefit
• Child Care Rebate

4. Consider getting your life insured

When you become a parent you become responsible for the welfare of your children. This is why it's sensible to think about how your partner and young child would cope if you were to pass away suddenly. It's not a very pleasant thing to think about, but the sad fact is it does happen. If you have life insurance, this money could be used to pay for a nanny so your partner could continue working, or it could be put away to fund your child's future education expenses.

5. Consider making a will

Once you start a family, a will may be a good idea to make sure that your children are looked after in accordance with your wishes if you pass away unexpectedly. You should also review your death benefit nominations on any superannuation accounts and/or insurance policies. A legal adviser can provide you with the knowledge and guidance to help you with these matters.

Financial health checklist

Here's a list of things you should consider doing to get your finances in order before your new arrival:

* Make a list of all your expenses so you get a clearer idea of what your expenses will really be

*Ask friends and family for second-hand baby items they no longer use

*Review your employment contract or talk to your HR department to find out what your entitlements are in relation to maternity leave

*Think about when you will return to work and whether it will be in a full time or part time capacity

*Find out what financial assistance you will be entitled to

*Determine how much your income levels will change, taking into account your extra expenses and changes to income levels

*Consider your insurance needs. You can discuss life, income and TPD insurance needs with our financial advisors

*Talk to a legal adviser about updating or making a will, we can provide a recommendation if you don't have one.

We're here to help

Our financial advisors can help you make sure you are financially ready for the arrival of your new baby. Meet our team and contact us for a complimentary, initial appointment.

* Medibank Private Limited, 'Health Cost and Utilisation Report', January 2017.
** AMP.NATSEM Income and Wealth Report, 'The cost of raising children in Australia', May 2013.
^ Australian Bureau of Statistics, '4402.0 – Childhood Education and Care', June 2014.
^^ For financial assistance you must meet certain eligibility criteria.

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