So your munchkin is on the way and you are super excited. You have a wardrobe full of nappies, and baby clothes and gifts from relatives and friends are already flowing in. Everything is in place and you are all geared for the baby’s arrival. You have even looked up names. But have you looked at your finances?
You are aware that expenses will rise with the baby around but are you sufficiently prepared? Here are some financial tips for first-time parents to help you secure the future of your baby and yourself.
- Re-budgeting – Shake Things Up
You had a budget in place before the good news. You and your partner pooled your incomes and neatly divided the sum under the expenditure, savings, investment, and debt categories. So far, this has worked wonderfully. But with the baby on its way, this will need a little bit of juggling. To begin with, save for the delivery. There will be hospitalization charges, medicines, and of course, vaccinations for your baby. If you have maternity cover, check the Sum Assured to see if it will be enough. If not, you need to get funds ready for the delivery. And, if you need to opt for a caesarean birth, well, it’s going to cost you something extra. Start preparing for these costs early on. With these things in order, you’ll be able to spend wholeheartedly on the baby without hurting your loan EMIs and monthly budget. Your financial life has to run even more smoothly with the baby around.
Additional Reading: All About Maternity Cover
- Start An Education Fund
The cost of education is skyrocketing and while an Education Loan is always around to help, it’ll be good to have a fund running. If at all you run into a financial crunch, your child will not have to compromise on education. Education costs are foreseeable and you must start saving for it with the arrival of your little one.
- Get A Life Insurance Policy
As parents, you will be the strongest pillars of your baby’s life. Yours will be the first finger the baby will hold when she/he learns to walk. Hence, it’s important that you keep the support going even if you are not around. The best way to do this is to get a Life Insurance Policy. This will protect your family against any misadventure and keep them provided for. You can always start small and increase the cover as your incomes increase.
Additional Reading: Advantages Of Life Insurance
- Draw Up A Will
All parents want to leave behind a legacy for their kids. We are sure you want to too. So, why wait for a later date? You can always do it with the arrival of tiny feet and hands. Drawing up a will will keep your child safe from family disputes. We know there are ample in India. The child will receive what he or she duly deserves without having to put up a fight. You can even name a guardian for you kid in the will.
- Emergency Fund
The two of you, alone, managed well with your savings and investments. But with the arrival of the baby, there will most likely be sharp spikes and falls in expenses. The best way to be prepared is to keep an emergency fund ready. An emergency fund is a decent sum of cash for you keep at hand for difficult times. It’s your last resort. You don’t have to disturb your investments or savings for this. The emergency fund can be replenished from time to time. You can even set a threshold for your emergency fund to avoid hurting your liquidity status. Ideally, your emergency fund should be equal to half your annual salary. Consider Fixed Deposits and Liquid Mutual Funds for maintaining your emergency fund.
Additional Reading: How To Build An Emergency Fund
- Plan Your Retirement
If you hadn’t thought about it earlier, now is a good time. It’s as important to take care of your future as it is of the baby. Once your kid is grown up and independent, you’ll have time to pursue some of your dreams. At that time, you shouldn’t find yourself broke. It’s not wrong to expect help from your children. But you also need to give them some space and time to establish themselves before they can comfortably take care of you. Moreover, if you are able to take care of your expenses, even in your retirement, it’ll show you in good light. It’s simply cool!
Additional Reading: How Much Do I Need When I Retire?
Remember, you, as parents, will be role models to your kids. They will consciously and subconsciously learn your habits. If you practice good financial habits, your kids will adopt these too. So, when you welcome your child to this world, gift her/him a secure financial future.