Financial planning for expecting parents
If you are about to be a new parent, you have a lot to figure out, and for many parents, the financial preparation that comes with having a new child
If you are about to be a new parent, you have a lot to figure out, and for many parents, the financial preparation that comes with having a new child is one that they did not prepare for. Making the right money moves when expecting a child can save you the pressures of adjusting when the baby arrives.
Below, are some of the financial planning and emergency saving tips that can help you;
Amend your household planning
According to statistics, the average cost of bringing a child is as follows; for one year, you’ll spend Ksh 72,000 to Ksh100,000. This translates to roughly 1.8 million Kenya shillings for 18 years. Depending on your annual income, your child’s first year could cost more and those costs will only increase.
Having these in mind, it is important to examine your income and spending now. Pull out current bank statements, and gauge your pay to your current expenses. Next, forecast future family expenses including housing.
Do away with extra expenses, reduce recurring living costs such as rent or phone bills, find ways to earn more income or research options to fit child care into your budget.
Take the pre-arrival period as a trial run for your new-baby budget by living on your adjusted budget, then use leftover funds for baby-related purchases or savings.
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Budget your parental leave
The labour laws provide parents with up to twelve weeks off after a child is born, this can be paid or unpaid. Check your employer’s policy on paid parental leave, and start saving to replace your income while you’re on parental leave.
Finance your emergency savings
A sufficient financial plan ensures that you can cater for unexpected financial hardships, including unemployment, medical emergencies, and loss of child care.
A well-maintained emergency savings account falls somewhere between two and five months of living expenses. A three-month emergency fund is reasonable for dual-income earners.
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Reconsider your health Insurance
With a newborn on the way, it is a good time to revisit your health insurance plans such as in-network health care providers, deductibles, co-pays, coinsurance, and out-of-pocket maximums. Visit your insurer to clarify how costs are covered and ask about programs that offer additional financial or health support to expecting parents. If necessary, you could also lower out-of-pocket costs by changing plans during open enrollment.
Remember, many plans don’t include maternity coverage for dependent children. You could end up paying out of pocket for prenatal and maternity medical expenses.
SEE ALSO: Paternity leave: How new dads can make the most of it
Clear your debts
The biggest financial headache for most families is debt. Doing away with debts and other liabilities help you to increase financial security and free up cash for building wealth and supporting your family.
Save for the Future
Save, save, save. Plan for your retirement, children’s education, health etc
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Organize Your Finances
Some end of life decisions need to be made very early, a written will gives you the power to decide how your child will receive assets and be cared for. Add your child as a beneficiary to existing bank and investment accounts and insurance plans, but don’t neglect to name a guardian to manage these finances for them until they reach the age of majority.
Giving your children a financial head start in life is good for their well being, behaviour and health outcomes both today and in the future. It provides them with security and financial literacy as well.