The Smart Parent's Guide to Preparing Financially for Your New Baby's Arrival
23rd May 2019
There are few experiences in a couple’s life more exciting than welcoming a baby into the world. Children provide a wonderful new light in your life. They help round out your feelings of purpose and meaning. They (might) bring you and your spouse closer together.
They’re also really, really expensive – much more expensive, in fact, than many expectant parents realize. An American study recently found that 54% of parents-to-be believe that the first year of their child’s life will only cost them around £4,000 ($5,000). The actual price tag attached to your bundle of joy could be four times that!
The same study also found that 57% of parents regretted not taking more financial action during the first year of their baby’s life. Working through this simple checklist with your spouse will minimise your own regrets, assist your budgeting, and help you both sleep a little better … that is, when the baby lets you.
1. Plan for caregiving.
The first step in adjusting your budget is to figure out how caring for the baby will affect your household income. Consider how much Maternity and Paternity leave you will want to take, and importantly check how much you'll be paid as most employers only pay the statutory minimums.
You’ll also need to plan for what happens once your maternity and paternity leave ends. Will both of you continue to work? If not, do you have friends and family close by who will watch the baby during the day? Or will you have to account for childcare expenses?
2. Budget for the essentials.
Even the most generous baby shower (An American idea but increasingly popular in the UK) and over-excited grandparents won’t cover everything your baby will need. Budgeting for big-ticket items like a good crib is important. But your weekly grocery bills will be going up too – for good. Today’s nappies, wipes, and milk will turn in to tomorrow’s first foods and toddler clothes before you know it. Do some comparison shopping and look for good deals.
3. Start ramping up your savings.
The earlier you start planning for long-term expenses like a university or savings account for your baby, the better. But at the bare minimum, you’re going to want to bulk up your emergency savings account. If you don’t already have one, take another look at the above items and think about how they’re going to impact the disposable income you’re used to. There’s a whole other person you need to think about now in the event of an emergency.
4. Prepare important documents and appropriate policies.
Once your baby is born, order some extra copies of his or her birth certificate to file away.
Then move on to your important documents. You and your spouse may need to review your wills, trusts, insurance policies, and investment accounts to take account of your new arrival.
If you don’t have a will or life assurance, you’ve put it off long enough. We can help you arrange the appropriate insurance and recommend a fellow professional for your Will.
5. Don’t lose sight of your retirement goals.
It’s easy for new parents to get so wrapped up in their babies that they neglect their normal saving and investment strategies. Unless you’re counting on this little person who can’t even roll over yet to take care of you in your old age, that’s a big mistake.
Don’t turn off those automatic contributions to your savings and investment accounts. But if providing for your baby’s needs will require an adjustment to your financial plan, come in and talk to us. You don’t even need to find a sitter for this appointment. We love helping new parents plan for their babies! But we don’t change nappies.