There is excitement, planning and heaps of dos and don’ts for the parents-to-be. From grannies, mommies and aunts to friends and acquaintances, everyone has some advice for the couple. What to eat, how much to eat, what to read, when to sleep… and if this is not enough, the would-be parents are scouring the net and pregnancy-related books to gain as much knowledge as possible. There are talks of decorating the room, shopping for toys, clothes and other essentials, making a list of baby names and so on.
But most to-be parents miss out on a crucial aspect of life that will change with a new member arriving in the family – PLANNING THEIR FINANCES. During the pregnancy stage itself, the expenses increase multifold with visits to the doctor, tests, medicines, essentials, and hospitalization costs. But after the baby arrives, the expenses skyrocket – from the very basic needs like toys, clothes, medicines and other essentials for the infant, to hiring extra help, regular visits to the doctors plus extravagant expenses like throwing a party or having a professional baby shoot.
Amidst all other planning around welcoming the baby, financial planning is a priority and needs key focus. Our recently conducted #FutureFearless survey revealed that 1 in 3 parents are unsure of the adequacy of their savings for their children’s goals and milestones in life, highlighting the need for greater financial education and planning.
All parents wish to give their children the best of everything in life. However, this ‘best’ comes with a price tag. But what to do and where to begin? That is what we will try to answer today:
Assess your current financial standing: First, evaluate your current net worth - your assets (what you own) minus liabilities (what you owe). For example, your savings, investments, FDs, gold, property, etc. are assets, while all outgoings like EMIs, credit card payments, etc. are liabilities. Next, you need to consider the in-flow of money. That would be the total income of the family, including the salaries or earnings of either or both partners, as the case may be, plus any other additional sources of income like dividends, interest, rental income, etc. Now, detail the outflow or expenses. Categorise all expenses as essential or non-essential.
Increase savings: Savings is the difference between your earning and expenses. To increase savings, you either need to boost earnings or reduce expenses. It’s best if you can do both. A sudden boost in earnings is quite unlikely though reducing unnecessary expenses is very much possible. If you do not have decent savings, it becomes much more important to be wise about expenses. Save as much as possible during the pregnancy months as these savings will be required once the baby arrives. Also, if the mother decides to stop working or extends her maternity period by taking un-paid leaves, it will further affect finances.
Insurance Coverage: Both partners, if working, can check for insurance benefits from their respective employers. Most corporates offer insurance to their employees, however the privileges vary. Check for insurance reimbursement for delivery-related hospitalization expenses and opt for the one that offers better benefits. However, it is also possible that the insurance offered by the employer does not cover pregnancy. In such a case, you will have to be prepared for handling this expense too.
Purchase/ Update health and life insurance: Be sure to invest in life insurance and health insurance. Even if your employer provides an insurance cover, it is important to invest in both life and health insurance such that the cover amount is capable of adequately meeting your family’s needs if required. Now that your family is expanding, any existing insurance policies must be updated accordingly.
Planning for the child’s future: Raising a child is no child’s play. The expenses just keep mounting over the years. Every parent’s constant endeavour ‘to provide the best’ often misleads them to spend on unnecessary frills and later worry about falling short of funds when they are required for the more essential aspects of the child’s life like skill development, education, marriage, etc.
It is important to start investing early in life towards defined life goals of which children’s education and retirement planning are key. Consider investing in child life insurance plans as they help save for the child’s future and also ensures that the child stays financially secure in case something unfortunate happens to the parents.
Financial planning is a vast subject and presented here is just a bucketful of advice for a particular milestone of life. At whatever milestone of life you are, make sure that you have a plan in place. It is always advisable to start planning and saving early in life but it is never too late to make a start.
Plan to stay financially stable and secure always and live life #FutureFearless.
