6 Tips for budgeting for a baby
There are few things as exciting as having a child — or as expensive. Follow these tips for budgeting for a baby to be financially prepared for the newest member of your family.
Expecting a baby is thrilling, but it can also be financially overwhelming: a new little one equals extra expenses. But there’s no need to feel daunted. Some financial planning can help you be ready for your new arrival now, and into the future.
1. Know your current financial position
Get a clear picture of your current financial situation. You’ll soon be facing a lot of new expenses, and you may need to make a few adjustments.
2. Prepare a personal budget
A personal expense budget can help you better understand your financial status and help you to achieve your goals.
3. Know the upfront and ongoing costs
From setting up the nursery, and buying the car seat and stroller, to the endless supply of nappies, formula and clothes, your baby will need quite a few things, as will you. And as your child grows, you’ll continually need to upgrade and replace many items.
Then there are the medical bills and future school fees to prepare for, among other ongoing costs.
4. Scale back on expenses
Conserve your cash and build up reserves by scaling back on all non-essential purchases. Try to stick to your baby budget and keep track of your monthly spending habits to see where you can save further.
Not all companies pay their staff members for extended maternity leave. If you have a partner, think about maternity and paternity leave, and who’ll be the primary provider and caregiver. Consider how these decisions will affect you financially. Practice living on a single salary – this exercise will encourage good financial discipline and will kick-start your savings.
5. Set up a Savings account
Set up a dedicated Savings or Investment account before your little one arrives. You’ll earn a higher interest rate, and the extra savings can help you better manage the initial expenses.
6. Think about investing now for schooling and tertiary education
Planning should go beyond the baby years. By investing now, you’ll be in a better financial position in years to come to pay for your child’s secondary and tertiary education.
With Stats SA reporting that the rising costs of education year-on-year is more than 9%, it’s advisable to choose investments that are likely to deliver returns at a rate higher than education inflation.
Speak to an accredited financial advisor to help you structure an investment portfolio that will help you meet your child’s future needs.