CAN WE AFFORD A BABY?
If the nursery is organised but your budget is a shambles, you may need to turn your attention to that bottom line
Smart and savvy tips for budgeting for bub
For most of us, the last thing on our minds as we spread the pregnancy news is how much having a baby is going to cost. According to various studies*, Aussie parents fork out between $3000 and $13,000 in the first year for their first child. And by the time that child leaves home, parents will have spent around half a million dollars.
No time like the present
If those figures sound terrifying, don’t be disheartened. Fiona Lippey, founder of online forum www.simplesavings.com.au and self-confessed ‘miser extraordinaire’, says, “If you think you can’t afford a baby, just remember so many people with children have less money than you do.”
Fiona is a case in point. When she and her husband had their first child 13 years ago, their household income was just $12,000, yet it didn’t stop them having three more children. “If you can dodge thinking that you must have a magnificent nursery, the perfect change table, beautiful wallpaper and so on, and realise that all your baby really needs is cuddles, nappies and food, then you’ll be fine,” says Fiona.
You may have just committed to a mortgage, or you may not ‘feel’ financially ready, but think twice about waiting until you’re perfectly set up money-wise. “Noone’s ever truly prepared for having a baby, so waiting until all your ducks are in a row is not the best idea,” says Fiona. No matter what your financial situation, you can afford a baby but, as Fiona says, “You’re going to have to make some changes.” Here are some key points to consider.
Identify your priorities
The first question to ask is how long do I want to stay at home with my child? “There is your motivation: do I want to pay a small fortune for a stroller or stay home an extra month?” says Fiona. “That’s where stretching the money has its real pay-offs. The best thing for your baby is to make the smartest, most researched choice – and not an emotional one.”
Track your income and expenses
Long before bub arrives, you need to look at your finances. If you’ve never done a budget, try the TrackMySpend app from www.moneysmart.gov.au/tools-andresources/calculators-and-apps/mobileapps/trackmyspend. Or simply jot down all your expenses over the next two weeks in a diary or a spreadsheet.
List fixed expenses (utilities, insurance, rent/mortgage), variable expenses (phone, groceries, transport) and luxuries (gym, dining out, beauty treatments). Next, compare that total to your income and calculate how much, if anything, will be left over when you switch to one income.
“It’s the loss of that second income that becomes the biggest problem for most parents-to-be,” says Fiona. “They are generally not prepared for that.” If the final tally leaves you quivering, it’s time to try living off one income and cut back as much as possible.
“Yes, it’s important to do a formal budget, but a lot of people won’t, so I say cut out all unnecessary expenditure right now. Don’t buy takeaway coffee, make sure you’ve always got a bottle of water with you and cook all your own meals,” she says. “See how low you can get and then you’ll know what your base level is.” It’s important to do this before you finish work so you build up a nest egg and get used to living lean.
Check your entitlements
Your salary may stop but there could be new sources of income to look forward to. Check whether your employer offers maternity leave or if you’re entitled to holiday, annual or long service leave. Government assistance will also help out, including Parental Leave Pay (PLP), which is currently set at the minimum wage
($695 per week before tax) for a maximum of 18 weeks. To be eligible you must be the baby’s primary carer, and meet certain work and income tests as well as fulfil residency requirements.
Additionally, your partner may be eligible for two weeks of Dad and Partner Pay (DPP), currently paid at the minimum wage of $695 per week before tax. Depending on your family work status, income and assets, you may also be eligible for Family Tax Benefit, Child Care Benefit, Parenting Payment, Rent Assistance and a Health Care Card. For more information, visit humanservices.gov.au.
It’s the loss of that second income that becomes the biggest problem for most parents-to-be.