5 Tips to Financially Prepare for a Baby

July 19, 2021

July 19, 2021

It’s estimated that the cost of raising a child from birth to age 18 will cost you about $285,000 - that’s about $16,000 a year, or $304 per week.

That might be intimidating but a little research and financial planning can make it a lot easier to manage.

Here’s BetterSaver’s top 5 tips to help you get ready for your little bundle of joy.

1. Start with a list of what you need.

When a baby is on the way it is so easy to get excited about all the cute little baby things being marketed to you. Save yourself some stress by planning out what you actually need to have and setting a budget. That way you can save whatever’s left for the adorable want-to-haves.

Talk to other parents about what they found they really needed when they had a baby. What were their absolute necessities? What made their life easier? They might even have some useful gear to pass on to you.

There is a substantial outlay to get everything you need in the beginning, but after that your baby costs should be fairly minimal for the first six months. You mainly need a lot of nappies! Reusable cloth nappies result overall in about a third of the expense of disposables, though they cost more to purchase initially. Plus they are much kinder to the environment.

Watch for sales on big ticket items like strollers, carseats and cots. Save money by buying secondhand clothing and toys. Share your list with people who want to help you out or buy baby gifts. And let the grandparents do the spoiling!

2. Budget for living on a reduced income.

If one parent is staying home to care for the baby you have to be prepared to live on a single income. If you don’t currently have a budget, make one now. Then add in baby expenses and childcare if you plan to return to work.

Making a budget requires taking a good look at where you’re spending your money. Identify areas where you can cut expenses so you can start saving now to prepare for the baby.

Remember when you have a baby you will spend more time at home, so figure in a bit extra for power, heat and water (especially washing all those nappies!). Also with a little one on the way, you may want to consider purchasing life insurance and income protection insurance so they will be taken care of in case anything happens to you.

3. Pay off debts

Make it a priority to get rid of existing debt or reduce it as much as possible. You might consider a consolidation loan where all of your debt is lumped together so you just make one payment. This may allow you to pay your debts off faster and at a lower interest rate. Everyone’s situation is different, so make sure you talk to a Financial Adviser to get personalised advice.

A few weeks back we talked to BetterSaver staffer Rupak about his strategy for saving. He and his partner own their home and have a baby on the way. When the baby arrives, they will live on a single income. Rupak’s saving strategy includes paying as much as he can to his mortgage now, so that later he can pay less. Even paying a little extra can take years off of your loan and save you thousands of dollars.

4. See if you qualify for government assistance.

There are two primary programs offered by the government to assist with the expense of having a baby.

  • Paid Parental Leave is available to expectant mothers, the mother of a child under 1 year of age, or the new permanent primary caregiver of a child under 6. To qualify, you have to be taking time off of work to care for a baby, whether as an employee or self-employed. Payments are based on your income and are available for up to 26 weeks.
  • Best Start provides $60 per week for families with a newborn baby until the baby turns one year old. It is not dependent on income but you cannot receive it at the same time as Paid Parental Leave. After your child turns one year old, you can continue to receive income-based payments until your child is three years old.

Best Start is part of the Working for Families Tax Credits. There are four types of payments available. Once you apply through Inland Revenue you’ll receive a notice letting you know which payments you qualify for. There is a calculator available to estimate your eligible payments here.

5. Sort your KiwiSaver.

If you’re thinking about having children, it’s not just about you anymore - you have to provide for your child. A little planning now can make a world of difference to your family’s lifestyle later on.

You might be looking at buying your first home. Your KiwiSaver fund can be used towards your deposit, helping you realize the dream of home ownership sooner. If you don’t plan to buy a home, your KiwiSaver funds are available to you when you retire.

Optimising your KiwiSaver fund can make a difference of thousands of dollars. Much more than a savings account, your fund is invested on your behalf. Finding the best fund for you and setting an appropriate contribution rate are key factors to getting the most out of your KiwiSaver fund. Plus, your employer and the government also contribute to your fund.

You can opt to continue your contributions while on Paid Parental Leave. One important thing to note here is that if you’re planning on applying for a Kainga Ora First Home Grant, you have to have contributed to your KiwiSaver for at least three years. So make sure if you take a break while on Paid Parental Leave it won’t affect your eligibility.

It may be helpful to talk to a financial advisor to determine how much you can afford to contribute while planning for your child.

BetterSaver Makes Sorting Your KiwiSaver Simple

Whether you use your KiwiSaver for your first home or for retirement, it benefits you to start saving now.

We believe every New Zealander should have access to easy-to-understand information that enables them to make the most of their KiwiSaver fund. That’s why we have done all the work of researching and analyzing KiwiSaver funds for you. All you have to do is take our five-minute Fund Finder Quiz to find the best fund for you. We’ll ask some questions about your goals, lifestyle, values and personality to make sure you find your optimal KiwiSaver fund.

Take the quiz and start saving today.

Get expert KiwiSaver advice.

TRY IT OUT

Older post Newer post