Some of the costs parents face in the first year of a baby’s birth may include:
- Feeding, clothing and caring for the baby: The most obvious and immediate expenses that parents foresee when looking ahead to their child’s first year are the costs of “kitting themselves out” for Baby’s arrival. This includes the cost of nappies, bottles, milk formula, breast-pads, a breast-pump, toiletries, clothing items, baby furniture, car seats, prams, as well as more “sentimental” expenses such as birth announcement cards, keepsakes and other memorabilia;
- Putting a roof over their child’s head: Many couples choose to rent or buy a bigger home to ensure they have enough space to accommodate their baby’s needs. This can also lead to an increase in related expenses, such as levies, water and electricity bills and maintenance costs;
- Transporting their child safely: This is often the time a family will buy a bigger car, or a more expensive car with better safety specs. Beyond the resulting increase in their debt (where the vehicle is financed through a loan), couples may also face higher fuel and car insurance costs;
- Paying for day care or a full-time caregiver: Unless one of the parents plans to stay home (which results in a reduced income), parents may have to appoint a caregiver or pay for daycare services to take care of the child during work hours;
- Healthcare access for their child: Beside the cost of the mother’s maternity care throughout pregnancy, and of the confinement and birth, parents also need to cater for their child’s ongoing healthcare needs after the birth. Couples often choose to upgrade to a more comprehensive medical aid package at this time to cater for their baby’s medical needs.
Many parents report that out-of-pocket medical costs and co-payments, even just for day-to-day medical needs like check-ups and certain vaccinations, may add substantially to their healthcare expenses in Baby’s first year. If the baby is born prematurely, or if there are any other health concerns or complications at birth, parents could face significant additional medical expenses;
- Cost of insurance and savings: Many couples often start thinking ahead once they have a child to care for, and are more likely to buy life insurance, invest in an education plan or start a saving plan at this point. This may add extra pressure to an already stretched budget.
Tips on preparing for and managing these expenses:
- A monthly budget: Having a clear view of your income and expenses will help you identify financial shortfalls and opportunities for saving. Start a monthly budget long before Baby’s birth. Prioritise paying off high-interest debts like credit cards – once they’re paid off, the interest savings frees up funds that can be put towards new, baby-related expenses. New parents are also often able to redirect expenses from areas of discretionary spending, like entertainment, to help afford many of the new costs they face;
- Get the timing right: New parents tend to feel they have to do everything ahead of the birth, but there are many expenses that can safely wait to a later date. For example, in the first few months after Baby’s birth, child-proofing the home need not be a major concern as the baby is not yet mobile. It’s also a good idea to wait until after the baby’s stork party before buying nappies, toiletries and clothing. Whereas it’s safe to defer some expenses until after the baby’s birth, when it comes to your longer term financial planning, it’s better to act sooner rather than later;
- Seek professional financial advice: When it comes to some of the more expensive financial decisions, it’s important to access good quality, independent financial advice to assist with longer term financial planning and make sure you’ve covered all the key areas of need;
- Make informed choices: It can be daunting, but this is the time to get to grips with the finer detail (which is why we recommend getting financial advice from an independent, properly accredited adviser). Ideally, this should be considered even before you fall pregnant.
When deciding on a medical aid option, for example, it’s important not only to understand what is covered, but also understand any potential shortfalls and co-pays as these can add up.
When it comes to life and disability insurance, policyholders often focus on the cheapest premium or on an impressive-sounding cover amount. R500 000 of death cover may sound like a big pay-out, but will it adequately meet your needs? It’s important to think about how you or your young family will pay for your existing and known financial obligations should you or your spouse suffer a serious illness or injury, or die. Your financial adviser can help you work through all these expenses, including your outstanding debts (especially if you’ve bought a new house or car), everyday household expenses, childcare costs (including education costs), and healthcare costs (cover for medical aid contributions, for example).
Then, you may also wish your life insurance policy to provide for unforeseen, additional expenses that may arise because of an illness or injury, whether your own or that of your child. Some providers offer child illness benefits to help parents afford expenses, such as major medical aid shortfalls, should their child fall ill or suffer a serious injury. However, exclusions or waiting periods may apply and it’s important to ensure you understand this at the time of purchase. For example, many child benefits exclude cover in the first year of a child’s life, even though serious health expenses often occur directly after birth. BrightRock automatically includes child cover where parents have bought cover for additional expense needs on their BrightRock policy and this includes cover from a child’s birth, but to qualify for cover from the time of birth, parents need to have had their cover in place for more than nine months before the baby’s birth.