Having kids can be an amazing and fulfilling experience, but believe me, it comes with a lot more than just the beautiful nursery and the cute clothes; having a baby comes with many costs and decisions that impact your overall finances, and often we underestimate these costs and decisions.
Education is one of the biggest expenses for parents. The cost of education year on year normally exceeds inflation. According to Old Mutual, the cost of education is expected to increase by about 9% per year.
Parents often forget about the hidden costs such as extramural activities, vacation, books, uniforms, and transport, among others. These can run into thousands each year.
That is why planning ahead is so important. As a parent, you need to start saving for your child’s education as early as possible.
Consider a tax-free savings account or exchange-traded funds for your education savings goal.
Even before they go to preschool, children bring about a lot of changes to your existing budget. As a first-time mom, nothing could have prepared me for the sheer amount of nappies we had to buy!
The once-off costs such as a pram, car seat, getting the nursery ready and related costs, can be budgeted and planned for in time.
The biggest additions to your new family’s budget are the day-to-day needs of an infant/toddler – that is nappies, clothes, formula or groceries – and expenses that cover your baby’s toys and books to stimulate them as they grow.
- MEDICAL AID
From pregnancy there are a lot of visits to the gynaecologist and many tests are done to ensure that mom and baby are in good health. This does not come cheap! It is estimated that for private healthcare, with all the antenatal visits and important scans, this can set you back more than R15 000, and your baby is not even born yet!
Then there are costs of giving birth as well. Post delivery, for the first 24 months of a child’s life, there are a lot of visits to the clinic or the paediatrician, all of which can cost a lot of money.
That is why it is important to scrutinise your medical aid to check what it covers during pregnancy and after the baby is born. And also take advantage of any free perks your medical aid might offer.
Although some people are able to stay at home for a while until their kids are old enough, many other parents don’t have that option.
One would either have to send the kids to daycare or enlist the help of a nanny or helper.
Depending on your daycare requirements and the area where you live, daycare cost can cost anything upwards of R3 000 per month.
According to the National Minimum Wage Bill, which came into effect on January 1, 2019, you should be paying your helper/nanny no less than R2 669.24 per month if you live in a major metropolitan area.
If you don’t have life insurance and other living benefits – that is critical illness, disability or income protector – it’s time for you to purchase that policy.
A life insurance policy can help ensure that your beneficiaries, such as your children and your partner, are financially covered in the event of your death or long-term inability to work.
Always remember to update your beneficiaries on your life insurance policy when there is a new member in the family.
- DRAW UP A WILL
Having a will ensures that your estate is divided according to your wishes, but most importantly, as a parent, having a will ensures that you get to choose a guardian for your minor children in the event of your death.
You can opt for the “DIY” approach but I would recommend drawing up a will with a professional instead – either with your bank or a lawyer.
It can feel overwhelming going through the list of all the things you need to do to prepare financially for a new addition to the family. However, it is important to also look at the bigger picture and not neglect your retirement savings.
Don’t put off saving for your retirement. If you do have a retirement fund (pension/provident fund or a retirement annuity), remember to update your beneficiaries accordingly.
(Please note: your child is not your retirement plan!)
Again, having kids is an incredible experience but you need to plan as thoroughly as you can to ensure that having a baby does not put a financial strain on your finances.
*This article first appeared in City Press