Full disclosure: this is not your average “how much do babies cost” article that you can read anywhere. Get ready to think much bigger, broader, and with greater focus for your family.
So, you’re embarking on the life and mind altering journey that is parenthood. Congratulations, this is such an exciting step!
Now, before you immerse yourself in the small stuff – the cost of nappies and the perfect bassinet – let’s fly you above and beyond that and help you get a birds-eye-view on your total financial picture, now that a new and very special person will be on the scene.
Having two kids myself including one who is in his late teens, and despite making some financially savvy moves when he came along, I can tell you there are some things I would plan differently if I had my time again. Allow me to impart some wisdom about planning for the bigger picture!
The 6-step baby plan you can’t be without
- Plan out the big stuff you would like to achieve for your little one. This can be hard to think about before you’ve even had the little bundle, but you and your partner will have an idea of your own personal preferences for raising a child. What expectations do you have for providing financially for your child’s…:
- Pre-school and schooling?
- Tertiary education (if any)?
- First home?
- Medical expenses (think about braces and glasses etc. too)?
- Then, think about what you might need to budget for each of these? In building a financial plan for your future, I can help you understand how much you need to put away in order to provide for this, and what is realistic.
- Get on the same page with your partner. This goes for not just the financial stuff, but parenting methods as well. You’ll make it a lot easier on yourselves if you have these conversations now, trust me! Talk about how you would like to provide for your family’s future, and what kind of a life you see yourselves having. Would you like to have regular family holidays, for example? Get talking!
- Figure out the parental leave thing. Would either of you like to spend more/all of your time at home raising the family?
- How much time can you actually afford to have away from work?
- How much can you get from the government vs. what your income is now?
- What will the shortfall be and how will you plan your return to work?
- These are all questions that I can help you with as we build a financial plan for your future.
- Open a KiwiSaver account for your baby straight away. You can make voluntary contributions each pay-day, and in doing so provide for their retirement and potentially their first home. I like KiwiSaver for kids because of the compounding returns you can get with it, and the low cost of entry compared to other investments. While your child is growing up this money will be building and growing on itself. It’s worth remembering that KiwiSaver money is locked in until retirement (with the exception of their first home or a significant illness or financial hardship). So if you’re looking for flexibility in your savings, open up a secondary savings account too. This could cover things like their first car, uni fees or their O.E – whatever you like – and is there when you need it. $20 per week would equate to $28,350 in 20 years time, (factoring in 3% compounding interest & not adjusting for inflation) – that’s not to be sniffed at!
- Make sure you protect your family from the worst. While we seem to have no problem paying for insurance on the family car, insuring your life and your health is far more valuable. There are various levels of protection you can put in place depending on your needs and budget – but it’s worth getting professional advice because you want to make sure you don’t pay for something that doesn’t work for you in the fine-print. A Will and Enduring Power of Attorney is equally important, not just for your possessions but you now also have to think about who will get custody of your child if you, your partner or both of you die. Don’t leave it up to the government to decide!
- Ensure you have a financially healthy home to raise a child in. Financial stress is seriously not fun and the stress will pass on to your kids even if you don’t want it to. Having a financial plan helps you to avoid the pitfalls and ensure you are responsibly providing for your family both now and long-term. There will still be bumps and curves along the path, but you’ll be ready for them!
So, what kind of a life do you want for your family?
Regardless of where you’re at now, taking a little time to plan now will make all the difference. You’ve likely got a plan for the birth, and a plan for all the baby gear you’ll need, so why not get a plan for your financial big picture?
To chat about your options and find out how to get your plan happening, I warmly welcome you to get in touch.