Bringing a new life into the world is one of life's greatest gifts. But the reality is, it comes with a whole host of responsibilities and costs, and the to-do list is likely as long as your arm. You’ve got to build the cot, stock up on nappies and get plenty of cuddly bears. But have you thought about your finances?
One of the key stressors for women during their pregnancy is worries around their finances. That's no surprise when in the UK alone, parents spend approximately $320,000 to raise a child to the age of 21, and the median income US families spend is roughly $284,570 for a child’s upbringing to age 18.
Are you feeling financially overwhelmed and unsure how to prepare for your little one's future? Don’t worry - with just a few simple steps, we can help you baby-proof your finances.
1. The baby budget
Having a baby can be an exciting and overwhelming experience. One crucial part of parenting is budgeting to ensure that your baby has the nutrition, care, and supplies it needs. Make a list of everything you need for your new arrival and find out how much it will cost. You will need to think about how you will live when you go on maternity leave but also prepare for the one-off costs.
Cover of the basics, such as baby clothes, diapers, food, stroller and other items. Once you determine what the expense categories are, writing up a budget plan will be much easier. With some careful planning and forethought, setting up a baby budget to give your child the best possible start doesn't have to be too overwhelming.
Also consider analysing your current budget to identify any potential savings that could be allocated towards baby expenses. Additionally, look for deals on baby items and consider buying second-hand where possible – these strategies can make creating a baby budget smart and straightforward.
Maternity leave leaves women with reduced income. It's time to reassess it.
2. Assess your new income
While budgets always need to be taken into consideration, the crucial factor to consider is the change in income once on maternity leave. It's essential to verify what kind of statutory maternity pay, if any, will be received and in what amount. Depending on your employer, there may also be contractual maternity pay offered as an additional benefit. As such, it's worth looking into whether this applies and creating a baby budget that factors in any income you may lose along with the newly received benefits.
Many women may be faced with reduced income while they are away from work, which can make it difficult to maintain their pre-pregnancy budget. It's also worth noting that women often take far more than the the amount of time offered by their employer, adding to the potential financial strain.
Women taking an extended break after giving birth should plan financially and develop a backup plan in case any unexpected challenges come up during their time away. Taking advantage of any opportunities offered through their employer, such as specialized benefits related to pregnancy or dependent care, can greatly reduce the financial implications of going on maternity leave.
3. Re-evaluate your own expenses
You've already got a sense of the baby's expenses, but what about your own? The reality is as one expense enters, another must leave if you want to stay on top of your finances.
You can start by reviewing you own expenses and prioritise what is essential versus non-essential. Essential items are likely to include household bills and groceries. Non-essential items may be a gym membership or takeaways - these are areas where you can potentially reduce your spending in order to save for the future. Evaluate what luxuries and subscriptions that you don’t necessarily need and start cutting them off your list monthly - it all adds up!
4. Talk openly about money
Talking openly and honestly about money, debt, and budgeting with your partner can be incredibly helpful when it comes to having a baby - especially if both parents are aware of the costs of creating a family and make sure they are both on the same page. Not only will this make raising a child smoother in terms of preventing any major financial arguments later, but also will be an example for them on how to responsibly manage money while being pregnant or raising children.
5. Pay off debt
One way to prepare for the financial burden associated with a newborn is to pay off any outstanding debts before the baby arrives. Taking the time to pay back loans, credit cards and other types of debt can make a world of difference down the road and help reduce stress associated with money management during and after pregnancy. Additionally, it can provide reassurance that your growing family has more financial flexibility. What's more, it will help you focus on all the excitement of welcoming a new addition, free of financial anxiety.