Off The Beaten Track

A financial planning guide for parents-to-be

“You can’t leave your child’s future to chance, so consult your financial planner about choosing appropriate cover…”

Having a baby is one of the most important decisions you’ll ever make, so you need to ensure that you’ve planned properly – financially, that is.

Look carefully at your fixed costs, and consider what is to come. Do you need to move into a bigger place? Get a new car? And what about medical care? The sooner you sort out these issues, the less strain you will be under when baby arrives.

Taking stock of all your monthly financial obligations and figuring out where you can cut costs might help you free up some cash for a savings account for your child.

You may be tempted to go overboard on baby accessories. But opting for hand-me-downs can save you a lot, especially on things such as car seats, strollers and cribs. The same applies to baby clothes: babies outgrow those adorable outfits in a month or three.

It is also worth considering breast-feeding over formula, and cloth nappies over disposable ones. Run the numbers – the savings are significant.

For newborns, disposable nappies cost between R139 and R209 for bulk packs, with one bag (depending on the size) lasting two weeks. Formula can cost anywhere from R150 for 800g, to R350 for 1.8kg.

The most important expense to consider is medical care. Find out what your medical plan offers.

For example, will you be covered if your baby is born prematurely? This is critical, because the cost of neonatal facilities at private hospitals can break the bank. If you are allowed a limited number of doctor’s visits, you’ll need to pay cash upfront.

Consider using state clinics for routine checkups and vaccinations.

Life and disability insurance are vital elements of your financial planning when you become a parent.

You can’t leave your child’s future to chance, so consult your financial planner about choosing appropriate cover – and draw up a will to ensure your child will have a guardian in case of your death.

Maternity leave is also a big consideration. Familiarise yourself with your employer’s policy and confirm how much you’ll be paid while off work, if at all.

Deciding who takes care of the baby in those first few months will have a big impact on your finances. If one parent opts to stay at home, will you survive without their income?

If you continue working, you’ll need to think about the cost of a nanny or childcare. Compare costs, look at your budget and decide what works best for you and baby.

It’s also wise to start looking at savings options for school and university.

Last year, Old Mutual estimated that the parents of a child who started Grade R last year would pay up to R1-million for public schooling. Private tuition would cost about R2.2-million.

Get help from a professional financial adviser to ensure you’re prepared for any eventuality.

This article first appeared in Business Times. Find the original here

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