Budgeting for baby
A new baby pulls on your purse strings as well as your heart. Taking time to think about how to prepare your finances as well as the baby’s nursery will ensure that when your new addition arrives, you and your bundle of joy are all smiles, as well as being financially prepared.
Having a family brings countless challenges and lifestyle adjustments, but the good thing is you have up to nine months to prepare.
The key is to have a plan so you’re ready for the change in finances that comes with your new arrival.
Parenthood has a major impact on your pocket as well as your heart. In 2009 Inland Revenue estimated the cost of raising a child to 18 years in New Zealand at $250,000, and that doesn’t include childcare or lost income.
Have a money plan
Whether you're a new mum or expecting your second (or third) child, it's important to rework your money plan to find out what impact a new child will have on your expenses.
Before the baby comes, try paying off as much debt as you can while you’re still earning. The less debt you have when your income is reduced, the better your financial situation will be. Think also about what you need to save up for and what items you might be able to borrow. Your plan needs to include the major one-off purchases you’ll need for a new baby, such as a buggy and a cot.
With a baby in the house there will be new ongoing costs like nappies, baby clothes and childcare, which need to be in your money plan. Use Sorted’s money planner to get a new household budget together that includes these extra costs.
Regularly reviewing your budget will help you cope financially with the changes so you can embrace your new lifestyle and family life.
Try out your new life
One of the most significant adjustments is living on a reduced income – whether that’s going from two incomes to one, or perhaps having to resort to a benefit if you’re raising your child alone. Depending on your priorities and lifestyle, you could be living on a reduced income for a reasonable amount of time.
Practise living on one income if one of you plans to stay at home with the new baby and use the money saved to buy baby necessities.
Counting on childcare
Childcare is likely to be one of your biggest expenses. If you and your partner both plan to work, the second salary may be used up paying for creche or a nanny. It's worth finding out if you're eligible for Work and Income’s childcare subsidy which helps cover the cost of care for children under five.
But if you live near your family talk to them about whether they might babysit for you. It’s a wonderful way for grandparents and extended whanau to start a lifetime bond with the newest addition to the clan.
Or you can talk to your friends about a childcare swap. It’s a simple way for all of you to save on childcare costs and you’ll get to enjoy some time being ‘child-free’.
Find creative ways to save money for when you are on a single income. Babies quickly outgrow clothes, toys and books and don’t appreciate that you bought the latest baby fashions.
Start a ‘pass it on’ system for baby gear with your family and friends who also have children. Renting is a good idea for car seats and other equipment that your baby won’t need long–term, and use toy and book libraries.
It’s also worth finding out what you may be entitled to. Visit the Ministry of Building, Innovation and Employment website to see if you can get Paid Parental Leave; and Work and Income has information on Working for Families tax credits.
But, remember: a baby's biggest need is love – and that’s free.
For more tips on making a baby budget, read about having a baby in the life events section of www.sorted.org.nz.
Top tips when expecting
- Start your money planning now, don’t leave it to the last minute
- Consider how your new baby will impact your income, work and childcare arrangements - childcare is likely to be one of your biggest costs
- Plan for living on a reduced budget, use Sorted’s money planner to update your budget
- Consider the changes to your household and lifestyle, like the potential need for a bigger vehicle or extra space at home
- You may be tempted to spend lots on baby items, but consider letting friends and family know what’s on your still-to-get list and use any items that you may have stored away after having your other child or children
- Sorted's event planner can help you make your own list of baby items and add up the costs
Where to go for help
- Sorted's guide for Having a Baby
- Work and Income: Financial assistance when you're having a baby
- Ministry of Business, Innovation and Employment: Paid parental leave
- Inland Revenue: Parental tax credit
- Plunket: Baby budget calculator and car seat rental service
- Ministry of Business, Innovation and Employment: Returning to the workforce and flexible working hours
- Parents Centres: Return to work programme
- Work and Income: Childcare subsidy
How do you manage? Have you got any tips to share? Do you think you're likely to spend $250,000 raising your child? Do you have any questions about budgeting or family finances that you'd like answered? Comment below.