Helen Baker, director of On Your Two Feet and a Career Money Life certified supplier, was mentioned in an article which was published in New York. Read the article for some tips and advice on how to be financially-ready when planning to have a baby.
“There’s no perfect time to have a baby though, is there?”
That’s what my friend quipped over lunch this week, having learned recently that she’s pregnant with her first child.
She was right, in a lot of ways. There’ll always be some emotional maturing to do before you’re ready to become a mother. There’ll always be work to be juggled, holidays to be pushed back, and big events to skip the champagne at, regardless of when you decide to take that step.
But in one sense, there is definitely a right time to start a family—and that’s when you can comfortably afford it.
Despite this, I know at least half a dozen women who’ve opted to get pregnant without tackling the budgeting side of child-rearing. Like my friend, it simply didn’t occur to these women to seriously plan for children financially—even though these are bright, engaged women who would comfortably discuss finances around buying a car or taking on a mortgage.
(My theory: Pop culture tends to treat pregnancies solely as either romantic developments or scandalous plot points, reinforcing an idea that baby-making is a decision only of the heart, not mind.)
So what can parents-to-be do to prepare for a baby financially? I asked author of Making the Most of Your Money NOW, Jane Bryant Quinn; financial adviser from On Your Own Two Feet, Helen Baker; and financial expert from Finance Women, Rhiannon Robinson. All have the same advice: Pay attention to the financial side of family planning – and do it now.
Because even if there’s no perfect time to have a child, having some savings up your sleeve when your baby arrives will be so much better than the alternative.
Start planning early.
“Like anything, the best way is to plan well in advance,” Baker says. “Planning for the baby should start as soon as the thought is being discussed.”
That involves sitting down to discuss how your careers and care giving roles will work once you give birth, as these decisions will directly define your family finances.
Baker suggests asking: “Will one of you stay at home? Both go back to work? Can we survive on one income? Have we got the right insurances in place? What compromises do we need to make regarding what we spend now and what about down the track? Who will be guardian if anything happens to us?”
Robinson suggests that about 12 to 18 months out from the birth is an ideal time to start planning for a baby. “This gives you a chance to practice living on a lower income [and] build up your cash reserves,” she notes.
And if your pregnancy was a surprise?
“Don’t panic,” Robinson says. “There are still lots of how options to prepare yourself for the new addition.” Just tick off as many of the below as you can before baby comes.
Check that your income and maternity leave are in order.
Create a spreadsheet to record your incoming and outgoing expenses, “so you’ll know if your savings will cover expenses if one partner leaves paid work, temporarily or permanently,” Quinn suggests.
You should also understand how maternity leave will work for you, Baker suggests. (In America, your 12 weeks’ maternity leave is unpaid—but many states have supplemented these federal regulations and provided more extensive maternity leave benefits, so find out what you’re entitled to.)
According to Robinson, it’s also a good idea to keep an eye on your incoming sums and spending on a monthly basis—not only during the pregnancy and your maternity leave, but also following your return to work. “It’s easy to let things slide and not realizing when you’re heading towards trouble,” she says. “It may not be fun, but knowing in advance is critical.”
Work out exactly how much to save.
Set a target “baby fund” figure, so you’ll know how much you need in your account before the arrival of the new addition.
If you’re not sure where to start, “Ask your doctor what a delivery would cost (after insurance costs) and work back from there,” Quinn advises.
It’s also wise to factor childcare, nursery decoration, diapers, extra laundry costs, stroller and other baby essentials into your budget. Some of these things will be given to you at the baby shower—but others are costs that will be difficult to avoid.
Avoid the status-symbol strollers and cribs.
Speaking of baby goods, don’t feel compelled to buy a designer stroller. “Often the cheaper option is the best,” Robinson says. “Prioritize safety, function, and price. Do you best to relegate style to the lowest priority.”
She also recommends choosing long-wearing materials. “Choosing the safe, long-wearing and value-for-money [baby carriage], cot, change table and high chair could easily save you upwards of $2,000,” Robinson says. “How many additional weeks of maternity leave could that give you?”
Reduce your debt.
According to Quinn, lowering your debt before baby comes is essential; this will allow you additional borrowing power later, if needed.
Baker agrees that paying down debt should be a priority. “[Make] sure the debt is manageable on one salary if you plan on some stay at home time with the baby,” she says.
“Yes, get rid of all bad debt—i.e. credit card debt—and cut the cards up so you don’t fall into the trap,” she says.
“Interest on credit cards are as high as 20% and it’s a bad cycle to get into.”
Work on changing your spending habits.
Gone are the days of fancy dinners out with your partner on a whim. It’s time to develop new spending habits – and that means exploring better value-for-money options for your weekly grocery shop.
“There is a reason that supermarkets heavily discount [diapers]. That’s because new parents are in the process of developing new shopping habits that will last them for decades,” Robinson says.
To find the best deals in your area, she suggests: “Try exploring new shopping areas while your new baby is happily snoozing in the [baby carriage].”
Prepare for emergencies.
Expect the best, but prepare for the worst: Couples should also ensure they have all the right insurances in place – private health cover, general insurance cover, and personal insurance cover, Baker says. It’s also a good idea to stash away a few months’ worth of expenses as a buffer.
“Ensure you have an emergency fund just in case the breadwinner gets made redundant or loses their job,” Baker adds.
It probably won’t happen. And hey, there’s no way to ensure that everything in life is perfect by the time your baby arrives.
But with a contingency plan in place, you’ll at least be covered in the worst-case scenario. And that’s a lot closer to perfect than throwing caution to the wind.