Money matters and your bundle of joy

May 11, 2015 

 

 

’Nimi Akinkugbe
| credits: File copy

Bringing a new baby into the world can be expensive. If you are planning on a new addition to the family or have just had a baby, here are some financial issues to consider as you plan for your bundle of joy.

A key step is to develop a new household budget. With the new addition to the family, start to review and estimate current and future expenses, from nappies, to university. New parents should discuss the expenses in detail. How much will you need to provide for all the costs? Will your income be enough to cover all these additional expenses? Are you or your spouse in a position to earn additional income at this time? If not, you may have to start cutting down on non-essential expenses before the baby is born and adjust your lifestyle accordingly. Will you need and be able to afford a bigger apartment or home? How much will childcare cost? Will one parent, usually the mother, stay at home; work full time, or part time? For how long will she stay away from work?

Even if you are able to or decide to stay at home with the children, bear in mind that an extended absence from work, skills and training, could limit future career options, and therefore your long term earning potential. Whatever you decide, whether you work or not, continue to develop yourself through training and education whilst your children are still young.

Start to save early. As soon as you know that you are expecting, start to set aside some money on a regular basis. Such savings will be very useful when the baby is born as one parent usually has to take time off for an extended period sometimes with reduced or without pay. Financial experts recommend that parents have at least six months of expenses set aside in a money market account for emergencies even before the baby arrives. Once you have about six to twelve months of expenses set aside in the money market, you can begin to build long-term investments.

For many families, child-care is likely to be a significant expense especially as most women must return to work outside the home or run their own business to earn income. Plan for this well before the baby arrives. It is imperative that you invest in full background checks for all those that work closely with you and your family. Visit a few good day care centres in your area, and select one that is close to home, affordable and meets most of your requirements; few will meet all.

This is also a good time to review your current levels of coverage across all your insurance policies including health and life insurance. Make sure that they are adequate and that they are updated to include the new addition to the family. As morbid as it sounds, life insurance is particularly important if you are the primary breadwinner in a young family, should something happen to prevent you from earning, or in the event of your death.

It is important to review and adjust financial documents to reflect the new realities. Most young people consider it absurd to write a will when they have little and the prospects of their early demise seem far-fetched. Yet, one of the most important reasons for having a will has nothing to do with money. For example, in a will you can appoint a guardian for minor children if both parents die. If you do not have clear instructions in a will, the courts can appoint a guardian for your child and a court-ordered administrator will manage their assets. Get it done now.

Providing for your child’s education is likely to be the single largest expense you will have in raising your child. Costs continue to rise each year so the sooner you begin to save towards this, the better. By starting early, you will have the benefit of a wider variety of investment options to help you to achieve your goals.

Welcoming a new baby is a joyful experience and with proper financial planning you can enjoy this life stage without being overwhelmed by what can be significant financial concerns.

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Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.

For more personal finance tips, contact Nimi:

Email: info@moneymatterswithnimi

Website: www.moneymatterswithnimi.com

Twitter: @MMWITHNIMI

Instagram: @MMWITHNIMI

Facebook: MoneyMatterswithNimi