Having a baby is one of life’s biggest and happiest decisions. It’s also one of the most expensive. But don’t let that turn you off. Making the transition into parenthood need not be a huge financial stress, as long as you’re prepared.
There are three major periods in the financial planning for your newborn. Here are our top tips to make the best financial choices in each.
1. Trying for a baby
- Now’s the time for Private Health Insurance
Although trying for a baby comes with so many choices, there’s one choice that you’ll need to make long before the baby arrives: whether you want public or private care. Unfortunately, you can’t wait until you’re pregnant to make this choice. To be covered, you’ll need to have pregnancy cover for 12 months prior to your baby being born. This means you need to take out or upgrade your policy to cover pregnancy at least six months before conception, just in case they arrive early.
Congratulations, you’re going to be a parent! Though the baby isn’t here yet, there are still many decisions and preparations to be made that will involve some kind of cost.
- Start budgeting and saving
Raising a child is expensive. Start working on your budget now so that when the baby does arrive, you’re not stressing out about expenses as well as your sleepless nights.
Costs to factor into your budget include:
- Daily expenses, ie. baby food, nappies, and infant care products;
- Medical appointments and medications;
- Baby clothes;
- House fittings such as baby furniture and baby proofing;
- Baby transport;
- Clothes and accessories for mum, ie. breast pump, maternity clothes.
- Settle debt
It’s by no means essential to be debt-free in order to have a baby. But in the months leading up to your new arrival, consolidating and focussing on reducing credit card or personal debt will in turn reduce financial stress when bub comes along.
- Plan for parental leave
Almost every parent in Australia is entitled to some kind of parenting payment from Centrelink to enable time off work to spend with their new baby. An income support Parenting Payment is available to lower-income earners. Parental Leave Pay is available to working parents who earn less than $150,000p/a, for up to 18 weeks, while Dad and Partner Pay is available for up to two weeks.
Parents may also be eligible for the Family Tax Benefit, a two part payment, which may also include a one-off Newborn Upfront Payment, and a Newborn supplement for 13 weeks. Contact Centrelink to work out what you are entitled to, and be sure to talk to your employer about your leave at least ten weeks before you plan to take it.
- Take care of Medicare
Medicare Safety Nets are thresholds for medical spending that reduce out-of-pocket fees. After you hit these thresholds, you will receive higher rebates from your medical expenses. If you have a partner, consider registering as a Medicare Safety Net family. This may mean you hit the medicare thresholds sooner, and save more as a family. When the baby arrives, you can register them as a member of the family, too.
Congratulations, again! Your baby is here and you’ve surely worked your way through some of the most difficult months of your life. But in between joyful cuddles and stolen naps, there are some important steps to take the financial stress out of keeping a small human alive.
There are a few logistical steps to take after birthing a child.
- You are required to register your bub with your state department of Births Deaths and Marriages. They will issue a birth certificate – a document that will be essential for the rest of your baby’s life.
- Register your baby for Medicare – adding it to your card and as mentioned earlier, and to your Medicare Safety Net family if applicable. This is necessary to receive rebates from medical appointments.
- Add your baby to your Private Health Insurance policy. If you have a family policy, this shouldn’t cost any extra, but will vary from fund to fund. If you are not going to have any more children, now may be a good time to cancel your pregnancy cover.
- Lay a financial foundation
Small steps now can make a big difference in your child’s future.
- Open a bank account for your child. Many banks offer accounts for the purpose free of fees.
- Regularly contribute to this account. Most of us remember school banking – depositing $5 a week via a little plastic bank book. Start this early and the miracle of compound interest will turn this small investment into a useful amount by the time they are 18. First car, anyone?
- Save with second-hand
We get it. Baby clothes are super cute (they’re so small!) and you can be forgiven for buying a few special outfits for your new best friend. But on the whole, they are a colossal money sink, with babies rapidly growing out of their clothes, toys and more. Don’t be afraid to shop secondhand online, through friends, or in store. And as a bonus, it’s not only kind on your purse strings, but on the environment.
- Invest wisely
Conversely, not every baby purchase is best made cheaply. A good quality pram, a well made car seat, and toys that don’t make sounds that will have you ripping the batteries out after a day, are all wise, long-term investments. Whether you’re planning to have more children down the line and re-use these items, or re-sell them once they’re no longer needed, spending a little more now will save you money in the future.
All of the outlined costs are fairly essential to your baby’s well-being, but there are some additional costs you may want to consider once your bundle of joy is earthside.
Are you a member of the MCC or SCG? Now is the time to pop your kid on the waiting list so they can come along with you. Trust us, they’ll thank you for this when they’re old enough.
Childcare centres have restricted capacities, so it’s important to register your interest on a waiting list at least a year before you anticipate needing the service. Be sure to start researching potential centres a while before you intend to apply.
If your heart is set on a particular school, be sure to get on the waiting list as early as possible. If that school is private, it’s certainly worth beginning to save long before that first orientation – from tuition fees to school uniforms, education can be very costly.
- Apply for a Passport
In a COVID-19 addled world, this may be less of a priority, but passports are still very useful to a lot of families. It can take 6-8 weeks for a passport to be processed, so plan ahead for any potential overseas trips.
- Take Stock
After opening a bank account, you may choose to go an extra step and buy investments, such as stocks, for your child.
- Childcare Subsidy
The Child Care Subsidy is available through Centrelink, and is paid directly to the child care provider. The amount of subsidy you receive varies, based on a number of factors.
If you are trying for a baby, pregnant, or already have a family, and would like some help navigating your expenses during this time, please contact one of our friendly Financial Specialists today. Alternatively give us a call on (03) 9835 8200.