It is very typical in our society. You have been married recently and soon parents, relatives, friends and neighbours start asking you when are you going to be a parent! Parenthood is a big step. There will be many changes in your life from various perspectives. People might say you are being too objective but you MUST consider your finances before you decide to become parents because one might not be aware of costs of birthing, parenting etc.
If you are surprised by the title of the post there’s a bigger surprise for you – people ask this question to us. Must read – Cost of higher education in India – infographic & calculator
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Steps to prepare you financially for parenthood
Save, Save, Save
You have to start saving more each month as there will be a new member in the family and it is your responsibility to provide for the child. There will be many expenses like doctor’s visits, vaccinations etc. with a newborn child and you need to have money for it. You will have enough time to save up a substantial amount if you start now.
Calculate the cost of having a baby and being parents in the first year
Having a baby requires lot of financing. Before the delivery, there will be costs related to the pregnancy, which means regular check ups, medicines and medical tests. The actual delivery and hospital expenses are to be taken care of. Once the baby is home, there will be costs like clothes, medicines etc. There are tools online that help you calculate the cost for 1 year. You can check with friends who have become parents recently or even ask the doctor.
Inculcate better money habits
It is important to start practicing good money management habits if you are not already doing that.
- Ensure that you do not get trapped in too much debt. Try to repay some of the costly loans like personal loans.
- Build an emergency fund worth 3-6 months expenses so that after the baby comes, if there is an unexpected emergency as well, you are in a position to mange finances.
- Create a budget by dividing expenses like fixed expenses (rent, regular expenses), variable expenses (grocery, petrol) and discretionary spending (movies, holidays etc.). Then track your expenses and try to live within the budget.
- Keep a check on unnecessary expenditure and make an effort to reduce them.
You need to plan certain things. You need to think through certain matters before the baby comes into your life as at that time the baby will be the most important priority for you and you will not be able to think about other things
- Live on 1 salary – If both the spouses are working, when the baby is born, one parent will have to temporarily stop working. This is a major financial consideration. Sometimes it will take long to resume work, which means you will have to manage on 1 income. You have to plan on how you will manage.
- Check Insurance coverage – Have you taken insurance? Check your insurance coverage and see if it will take care of the additional family member else opt for higher coverage or a family floater.
- Leave policy of the company – Look at the leave policy of the company that work in on paid maternity and paternity leaves. Check the company’s stance on additional leave required. Most companies cover medical expenses for 2 children. Check the procedures and terms and conditions regarding the same so that you are not in for any major surprise.
- Take care of health – Both parents should take care of their health. It is important that both are fit and do not have health problems. This will lead to physical and financial difficulties.
Do not go overboard purchasing baby stuff
The shops will have lots of nice things to buy and it will be easy to go overboard and buy cute toys, clothes and things. But you have to hold on. A small baby does not need too many things but more of your attention and love and he/she will soon outgrow things. As the child grows bigger, there will be many opportunities to buy stuff and you can indulge in your child a bit by bit.
Make a will
It is important to make a will and make sure it is clear as to who will get what of your assets and liabilities in case of any unfortunate event. The baby needs financial protection for future and you should ensure that you give him/her that.
Complete Guide – Child Future Plan
Have you thought of the financial factors to consider before taking the step towards parenthood? Let us know what kind of preparation from a financial perspective have you done.