Having a baby? Here's your financial to-do list.
Recently, a glowing young couple came into our office and shared their wonderful news: “We’re pregnant. What should we do?”
Perhaps the most wonderful life event and game-changer for a couple’s finances is the arrival of their first child. In that spirit, we shared with this couple our top five baby steps for new parents.
Saving and Budgeting
As you start to prepare for those inevitable baby expenses, you’ll want to first evaluate what your monthly budget looks like today. By performing a cash flow analysis that breaks down your take-home income, monthly savings, and your fixed and variable expenses, you can identify areas where you can cut costs and bolster your savings. We usually ask you to consider a baby savings fund where you set aside money for one-time expenses such as a cot and pram, as well as ongoing expenses such as daycare and nappies.
Children’s Education Savings Plan
Many of our Xer’s clients have said that having a high school education savings fund to put their child through high school “and university” was truly important to them. Consequently, we recommended they start saving into a children’s education savings plan. When you establish a children’s education fund known as a tax paid bond for your child, you retain complete control of the money. Any growth is always tax-free as long as the funds are used for educational purposes. Higher education costs are fast becoming one of life’s biggest expenses. Kids spend years paying back there HEC’s debts after leaving university and get their first job. You can really help you kids by get a better start to their careers by establishing a savings plan early, the structure also provides an effective disincentive keep you/parents from dipping into their kids funds for other purposes.
Life Insurance
The first time you are separated from your new bundle of joy, whether it’s for a few minutes, hours, or days, you may begin to wonder what would happen if you were no longer around to protect him or her. There are many life insurance options available varying from term life to cash value policies. While each individual situation is different, young parents on a budget may consider an affordable life insurance policy that offers a set death benefit amount sufficient to cover their family’s financial needs. Remember, one of the most important aspects of life insurance is to make sure that if an unexpected event happens you, your spouse and children can maintain their economic quality of life.
Estate Planning
We set up a meeting for our clients with our estate planning partners who provide planning advice as part of preparing your Will, they will help you decide who should be your executor, help you to appoint guardians, help you understand you are obligated to leave to and ensure you are not leaving property that have debts owing on them. They will also make sure you understand that you superannuation does not automatically become part of your estate – and make arrangement in conjunction with a Wealth Effect adviser to ensure you super assets are passed to your love ones in a tax efficient manner.
In today's more complicated world it's important to ensure that your Will provides the best outcome possible for your family. With our expertise we can make sure you get the right Will, to help achieve that.
Your Own Retirement
With all of the new baby expenses adding up, it can be challenging to stay the course with your current financial and investment plan. It’s a common misstep for parents to focus their finances around their children at the expense of their own retirement savings. We advise that the best way to take care of your child is to take care of yourself. Your children are counting on you to be there for the long run. Show your kids how you prepare and save for the future.
We encourage our clients to be great financial role models for their kids. The sooner you start, the sooner you and your family may achieve retirement readiness.
