Preparing for Parenthood: Financial Tips for Expecting Parents

Just recently, I became a father of a beautiful little girl and so far it has been one of the most exciting experiences I have ever had, but it also comes with significant financial responsibilities. As you prepare to welcome a new member to your family, it's crucial to get your finances in order. Here are some practical tips to help you navigate this new chapter with confidence.

1. Create a Budget

The first step is to create a comprehensive budget that accounts for all your current expenses and anticipates the additional costs of having a baby. I have found budgeting is essential to prepare for changes in your income and lifestyle. Consider costs like medical bills, baby gear, childcare, nurseries and potential loss of income if you or your partner take time off work.

Rough projections from our baby expenses for the first twelve months will come to just over $10,000, and that is going through the public system (opted not to go private). - See the very end for the average amount spent on newborns by a report from Westpac at the very end of this article.

2. Build an Emergency Fund

Life is full of surprises, and having an emergency fund can provide peace of mind. Aim to save at least three to six months' worth of living expenses. This fund can help cover unexpected medical expenses or other unforeseen costs. One of the best ways to start building the emergency fund is to set a goal, if you earn $7,000 per month, and living costs are $5,000 per month…

Maybe aim to save $1,000 per month in a separate account that is for emergencies only.

3. Review Your Health Insurance

Make sure your health insurance covers pregnancy, childbirth, and newborn care. If you're considering private health insurance, compare different policies to find one that offers the best coverage for your needs. Moneysmart.gov.au emphasizes the importance of understanding your health insurance options[1].

Please note, if you are going down the private route, it is roughly about $6,500 per annum for private health insurance and you need to hold the cover for 12 months before you or your partner gives birth to your beautiful child.

4. Plan for Maternity/Paternity Leave

Understand your entitlements for parental leave and how it will impact your income. Some employers offer paid leave, while others may not. Plan ahead to ensure you have enough savings to cover your expenses during this period. The key is to talk to work colleagues who have gone on maternity leave recently or you HR representative.

5. Start Saving for Education Early

Education costs can add up quickly, so it's never too early to start saving for your child's future. Consider setting up a dedicated education savings account or you could look into education bonds. The earlier you start, the more time your money has to grow.

We set up our education saver for our little girl about a few weeks after she was born, and we have invested those savings for the long term.

6. Update Your Will and Estate Plan

Having a will and estate plan in place is crucial to ensure your child's future is secure. This includes naming guardians for your child and outlining how your assets should be distributed. Creating a will is an essential step in protecting your family's future [1], and you should look to book in with an estate planning lawyer to do this properly. The postal Will from the post office won’t really cut it, I doubt you would want to use a Will document out of a cereal box to protect your assets and family (essentially what the postal Will’s are).

7. Consider Life, TPD, Income Protection and Trauma Insurance

Life insurance can provide financial security for your family in the event of your untimely passing, whilst total and permanent disability insurance can make sure your family is set up if you are unable to work due to disability. These insurances are essential for protecting your wealth and potential wealth as well. The younger you are, the more essential Life, TPD and income protection is.

8. Look for Childcare Options

Childcare can be one of the biggest expenses for new parents. Research different childcare options and compare costs to find the best fit for your budget. Most Childcare centres within the South-East of VIC are roughly $145 per day (without rebates). You can consider alternatives like family daycare, nanny services, or even sharing childcare with another family.

9. Take Advantage of Government Benefits

Check if you're eligible for any government benefits or financial assistance programs for new parents. These can help ease the financial burden and provide additional support during this time. Centrelink is a huge pain most of the time, however I found applying for the parenting pay quite seamless, just be wary if your situation is a little more complicated, as this is when Centrelink can be difficult to deal with.

10. Stay Informed and Seek Professional Advice

Financial planning can be overwhelming, especially when preparing for a new baby. Stay informed about the latest financial tips and seek advice from a financial planner if needed. Moneysmart.gov.au offers a wealth of resources and tools to help you manage your money effectively.

Cost of Raising a Baby in the First Year

According to a report by Westpac, the average cost of having a baby in the first year is around $7,9182. This includes expenses such as:

• Nappies: Approximately $606 per year [2] (We expected to spend roughly $2,000 on nappies - cost of living increases suck!!)

• Clothing: Around $649 per year [2] - (We actually have been given so much clothing, I suggest not buying any if you can help it - which is hard because all the little clothes are super cute!)

• Food/Nutrition: About $1,227 per year [2] (This is if you are exclusively breastfeeding… If you need to go the formula route, expect at least $35-50 per week and then add the $1,227 for the year)

These figures can vary depending on your location, lifestyle, and personal choices. It's important to plan ahead and budget accordingly to ensure you're financially prepared for the arrival of your little one.

By following these tips, you can ensure that you're financially prepared for the arrival of your little one. Parenthood is a beautiful journey, and with the right financial planning, you can enjoy it without unnecessary stress.

Until next time,

Take Back Control

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[1] - Having a baby - Moneysmart.gov.au

[2] - How much does it cost to have a baby? | Westpac - 2021 report