Having a new baby is a much-anticipated event.
It’s an exciting time for the parents to be.
However, while growing a larger family brings added joy and love to your household, it is also a time to review the household finances.
If not planned properly, things can get out of control (me talking as the voice of experience!!)
Being prepared financially goes a long way to reducing stress in life.
This then allows you to enjoy the bundle of joy you are bringing into the world.
To help you get you on the correct track, below are six personal finance tips and to-do’s that new parents should consider.
These are not strictly for parents to be.
If you have young children already the outlined to-do’s are as relevant to you as they are to new parents.
It’s never too late to get started.
#1 Figure Out Your Health Insurance Coverage
Even if you have good health insurance coverage, the bill for having a baby can be an expensive one to pay.
When you find out you are expecting, contact your insurance company and get a basic framework for what portions of the physician and hospital costs are covered and which ones you will need to pay out-of-pocket.
Even though the determined amount is only a ballpark figure, it can help you set a goal to save.
This then helps you avoid potentially getting underwater with medical bills.
When contacting your health insurance company, it is also a good time to determine the process to add your new little one to your policy as well.
Another personal finance tip – review your insurances annually!
#2 Create a Baby Budget
This is a simple personal finance tip.
Even if you are good at budgeting, you will need to make changes to it to account for the additional cost of your newborn.
You will need to include costs such as nappies, feeding supplies, clothing, toys, holidays etc.
We also recommend starting your budget when you find out you are expecting.
You can then include a section where you work in the expenses of high-cost baby items such as a pram, cot and decorating that has to be catered for.
If you plan to return to work in some capacity, it’s a great time to estimate your child care expenses as well.
#3 Make Any Necessary Life Insurance Adjustments
If you have a life insurance policy, you will need to review your coverage.
You will have to increase your cover to include the care of your child in the event something unexpected occurs.
If you don’t have a policy, now is the time to get one.
This ensures your family are protected if the worst happens to either parent.
It is also the perfect time to review any other policies, such as income protection and employee benefits.
Take stock of what you have first of all.
Check all of the amounts to make sure that you and your new family are fully covered.
We can do this for you.
In fact, we offer a free review service on existing policies.
#4 Create your Financial Plan
Everyone should have a financial plan.
Read here the benefits of financial planning for parents.
Find out what your employer covers for maternity or paternity leave.
Make sure to include savings in your budget so that you can have the amount of lost income during this time saved up.
This will help you alleviate any strain on your budget after your little one arrives.
If you don’t plan to return to work, or plan to work only part-time after your leave, you will need to create an adjusted budget and make other adjustments to bridge the gap that your loss of income will have.
You’ll likely be planning holidays already. All the good stuff we want to do with our kids. Experiences.
Disneyland, sun holidays, travel.
Don’t sit and think ‘that’s years away, we’ll get there and the cost will be there’.
Actively plan for it to ensure it happens.
Our financial planning service will cover all of this for you.
You can learn more about it here.
#5 Start investing in an Education Fund
One of the biggest mistakes parents make.
While it may seem like college is a long way away, it can sneak up on you in a financial sense.
College tuition is one of the largest expenses that families will face when raising their child.
A recent report in the Irish Independent confirmed the cost of college can be as high as €14,000 per year.
This is for a student living away from home.
Too often savings fall short because many parents don’t get started until later on in life.
Starting early will help your money grow faster, reducing the amount that you will have to put into the account in the end.
Get the money invested.
The bank and credit union are of no use here due to inflation.
Ensure you benefit from the long term growth equities will provide you.
If you’re new to investing, this article will provide you with a good insight.
#6 Start or Increase Your Emergency Fund
One of the most important personal finance tips.
Parents or not parents, it is always critical to have an emergency fund.
The Coronavirus pandemic has taught us a lot, and for those who lost income or jobs, the importance of an emergency fund was one harsh lesson.
We recommend between 3 and 6 months AFTER TAX income.
6 months is ideal.
This way if you suffer a loss in income, an expensive event, or an unexpected major repair, you will have the funds to cover it without having to fall behind in bills or borrow against your assets.
Don’t get sucked into those expensive Credit Union loans to cover costs like holidays and repairs.
If you currently have an emergency fund, you will want to increase it as your financial need will be greater with a new baby.
Summary
According to the American Psychological Association (APA), the top cause of stress in the United States is money.
This is in a country with a population of 329 million people.
If finances are the number one cause of stress in a pool of 329 million, it’s surely high on the list of a population of 4.9 million in Ireland.
Take a little time to get your financial house in order before your little one arrives.
You will have a roadmap for your finances.
Start with the above simple personal finance tips and mark them ‘to-do’.
This will allow you to relax and enjoy your new addition and family, the best things in life, without having to stress over your monthly bills.
How we help
The above may seem simple but tedious.
We can take the effort out of this for you and provide you with one cohesive plan.
All of the above boxes will be checked for you, and some more.
Read here about a recent client of ours and how they benefited from this.
We absorb the cost of an initial discussion to demonstrate how this would work for you and your family. Request a callback here to schedule.
Alternatively, book straight into my diary here, email info@fortitudefp.ie or give me a call, 086 0080 756.
Enjoy the read? There are over 30 articles we’ve written on various subjects, they can be accessed here a wealth of free information.
Francis McTaggart CFP® SIA RPA QFA
These blog posts are intended for information purposes only and should not be interpreted as financial advice.
You should always engage the services of a fully qualified financial planner before entering any financial contract.
To discuss engaging the services of Fortitude Financial Planning please email us at info@fortitudefp.ie.
Fortitude Financial Planning Ltd will not be held responsible for any actions taken as a result of reading these blog posts.
Production