With parenthood comes huge financial responsibilities. No more lavish Credit Card spending. Your life changes after the arrival of your first baby. Once you plan to become a parent, you cannot overlook any financial aspect that can negatively impact your child’s future.
There are several important steps you must take to fulfil your financial responsibilities towards the child.
Let’s start with the expenses of child birth.
Check your policy: Estimate the medical expenses you are likely to incur while expecting your child. Check with your Health Insurance provider if it covers maternity expenses. Usually, a Health Insurance Policy acquired through your employer covers maternity expenses.
Plan your leave: You must plan your maternity or paternity leave in advance. Fathers too require time off to support their family. Ensure that you spend your leaves judiciously since you’ll need them after your child is born.
It is important to understand your company’s policy on this matter. Some companies allow paternity leave while others don’t. When it comes to maternity leave, the government has mandated six months of leave.
Additional Reading: Planning Finances When You Have Children & Parents
Maintain liquidity: Whatever your financial plans were, up to the point of childbirth, it is important to tweak them to accommodate the arrival of your first born. Due to this, you will require greater liquidity than before.
Your home budget will change because your newborn will require special attention in terms of clothes, food, medicines, immunisation, etc. So, change your investment and saving patterns in advance.
Start putting funds in liquid investments like recurring deposits, liquid Mutual Funds, sweep-in bank deposits and high-interest Savings Accounts. Such funds will give you the financial strength to handle increased day-to-day expenses that arrive after childbirth.
Additional Reading: How To Liquidate Your Investments
Fix responsibilities: If both husband and wife generate a regular income, it is important to decide well in advance who will take care of the baby and how each is going to manage their professional and domestic workloads. If the mother gets a sabbatical as a maternity benefit, you will certainly find it easier to manage things at home.
Additional Reading: How To Plan Financially For Maternity Leave
Plan your move: If you are planning to buy a home or shift to another one, do it before the birth of your child. You may find it difficult to manage shifting locations immediately after your child is born.
Additional Reading: Good News For First-Time Home Buyers
Prepare for emergencies: It is highly recommended that you keep your contingency fund large enough to meet any emergencies arising out of childbirth and beyond. It is better to adjust the contingency fund as per the requirements of the child.
Complete your shopping in advance: You should plan the things that you will require immediately after childbirth and start buying them in advance. Last-minute buying could be expensive, strenuous, and could lead to bad decision-making.
Control your spending: When a new member joins your family, your regular expenses are bound to increase in every sphere: travelling, healthcare, food, entertainment, etc. Therefore you must plan your expenses judiciously and keep a strict watch on your spending.
Watch your debts: Do not take new Loans or add fresh EMIs just before you have your first child as it could put pressure on your liquidity. Staying light on debt, or completely debt-free will allow you to handle new expenses easily.
Reassess Insurance options and redo nominations: Once your baby comes into your life, you need to update and add a member to your Health Insurance Policy. You should also reassess and increase your Life Insurance cover to cater to this new scenario.
If you haven’t opted for a disability and critical illness insurance rider, then consider adding it to your policy. You may consider adjusting the beneficiaries and nominees as well, once your baby is born.
Start investing for the child: It is now important you start saving and investing for your child’s long-term needs. The sooner you start, the more compounded growth you will reap on your investments for the long term. Speak to your investment advisor about the best child investment plans. Also, do not forget to work towards your own life and retirement goals.
With smart planning and execution, you can welcome your first child into a secure life and give him or her a bright future, ultimately allowing you to lead the ideal life you would have wanted for your family.