Advice for parents-to-be

ENSURE YOU HAVE EVERYTHING IN PLACE

Siba Njoba, an advisor at Masthead Financial Planning, advises a couple who are planning to start a family.

Q: My husband and I are planning to start a family in the next year. We have some credit card debt, are paying off a car and are renting. Collectively we earn just under R40 000 after tax. I am on a medical aid plan with a full hospital plan and savings without gap cover yet. I would get two months paid maternity leave. What expenses, baby costs, investments, etc should we take into consideration beforehand?

Answer: Starting a family is a very exciting experience and well done for taking the first step to planning for your family’s financial future.

I would strongly advise that you review the medical aid plan that you have, to ensure you have comprehensive cover for all gynaecologist visits and that your hospital is in close proximity.

Gap cover is essential, as it covers the shortfall that often occurs when you have a medical procedure.

I would also recommend that you consider sickness cover – should you experience any complications. Sickness cover pays out the equivalent of your monthly income in the event of illness and during a period of special leave like unpaid maternity leave.

I would encourage you to start saving for all of your child’s immediate expenses: from the monthly spend on items such as formula, diapers and a baby’s caretaker, to their education.

Investment vehicles that you could consider are a tax-free savings account or a unit trust portfolio, where you are able to have access to the saved funds – as and when you need them.

Also, consider short-term to long-term strategies to best meet your family’s financial needs. For example, in saving for the child’s immediate needs, you could invest the money in a portfolio that is suitable for the short- to medium term, while saving for the child’s education can be put in a portfolio that is geared towards a long-term strategy investing in growth assets and equities, considering the investment time horizon and risk profile.

You have indicated that you will have two months’ paid maternity leave. Once the baby is born, you may want to have an extra month at home – so make provision for any extra unforeseen expenses.

Furthermore, contact your employer’s human resources department and ask them about the process of claiming from your UIF (Unemployment Insurance Fund), as well as the expected payment from the fund.

It is also important to have a debt reduction plan in place.

Teamwork is key … work together with your husband and find creative ways to see where you can save. Cut back on luxury items and review your life policies.

You could pay more for your car repayments to shorten the debt-repayment period and save on interest. The same can be applied to your credit card. Pay off the lowest debt amount first, tackling debt one at a time.

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