Planning ahead means you’ll have time to get ready for the financial changes you’ll experience once baby arrives. Anything you can start taking stock of now will make money matters down the road easier on your wallet and your sanity!
Living on one income source
Most couples will need to prepare for a drop in income as one member of the household will likely have to leave work, but there are things you can do to cushion the blow beforehand.
The more prepared you can be for your new arrival financially the better. Whether it means you have to reduce your current regular savings or you have to give up a few luxuries, a reduction in income will affect you one way or the other.
A good place to start is to create a budget. Work out all of things that are necessities, such as your mortgage, utilities and your car. Then look at other items you spend on such as eating out and clothes (non essentials). Split your list in two. Then try and estimate how much you think you will be spending additionally once the baby has arrived (speak to friends and family about their experiences).
You should now have a good idea of your spend each month. Does one income cover this? If not it’s time to start taking things off the ‘non essential list!’ Plan to eat out less or cut your spending on entertainment etc. It is about making compromise.
Once you have created a budget, why not try a practice run? Test out what it is like to live on one income. Give it a go. The money you will save from the current second income means you will have saved a little extra to go and splurge on your bundle of joy!
Shopping for your baby
It’s temping to buy everything brand new for your baby. It is easy to get caught up in all of the excitement and want to purchase the latest of everything, but this could end up costing a small fortune and no doubt most purchases will become redundant when your child grows out of them.
The second hand route can be an excellent way of saving money. Contact your friends and family who have recently had children and ask if they no longer need items, would you be able to buy them at a reduced rate? You will often be surprised at what they are simply willing to give away! There are also an abundance of websites selling second hand items. The quality of which tend to be great as they tend not to be particularly used.
Avoid the marketing hype
Having your first baby is a once in a lifetime experience, and because of this retailers go straight for the financial jugular. But while it’s important to equip yourself with the essentials like a new car seat that meets safety standards, other non – essential items can be avoided. Does your child really need designer baby grows? Or a push-chair with an 8 -speed selection? Be sensible in your purchases. Remember it doesn’t stop anytime soon. You have at least another 18 years of spending to contend with.
Saving for your child’s future
The earlier you put plans together for your child the better. If you haven’t started already start now! There will inevitably be costs involved over the forthcoming years to contend with from school clothing, holidays or going to the dentist. It all adds up.
Furthermore if you have dreams of your child going to university be warned. According to the NUS (National Union of Students) the average cost of sending a child to University in London is estimated to be £23,521 per year. (2013/2104) With the average course length standing at 4 years. It is easy to do the math. More than one child? You are going to need a big pot of cash!
Don’t forget the important stuff
There are lots of costs that seem to get neglected when it comes to having a baby. Maternity cover as an expatriate is essential if you are planning on having a baby. Some companies will offer this as part of their medical package but check the small print. As an expat if you don’t have maternity cover and wish to have your baby whilst living offshore you will have to pay for it. All of it!
Maternity cover can become a major financial roadblock that expectant parents often fail to account for. Having cover in place means that you can be safe in knowledge everything is covered, even if there are complications. Be warned though. You policy will need to be valid for at least ten to twelve months before you become pregnant for the insurer to pay out.
Life insurance should become part of your financial planning now too. When you live a single life with no dependents, life insurance can feature near the bottom of your financial priorities. However, having your first baby should act as a trigger to get cover in place. Should the worst happen you will be safe in the knowledge your child/children will be looked after.
Think about starting a ‘baby fund’. First and foremost aim to have at least 3 months salary as surplus capital at the ready. This allows you a buffer for any unexpected costs. Regardless of whether you have children or not you should be saving an absolute minimum of 10% of your salary every month, without fail. But having children brings with it all sorts of responsibilities for the future so it is even more important. If you can, double whatever you are currently putting away. The more you can save in the early years the better
Are you financially ready?
Many couples put off having children because they do not feel that they are in a financially stable enough position. Nearly half of all babies are now born to women aged 30 and older and the number of children born to women in their late 30s has almost trebled in recent years.
The reality is that a large percentage of couples put off having a baby because they do not feel financially stable enough to do so. In fact many will only feel ready after achieving a good career, a fat retirement account, and university savings in place, before they will even start thinking about having children. On the other hand some are comfortable trying to grow their family’s financial stability alongside their children. There is no right or wrong way. One thing is certain though, having a baby will cost you money. The more you plan, the better you will be equipped to deal with this.
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