7 essential money tips for new parents
PARENTHOOD BRINGS WITH IT a wealth of emotions along with a whole new world of financial responsibilities. Life becomes a series of short- and long-term financial goals, all revolving around your little ones. Your child is one of the biggest expenses you will incur in your lifetime. Bringing home a new baby requires total remodelling of your finances. Ideally, the financial planning should begin simultaneously with the plan to have a baby.
It is natural to feel overwhelmed under the weight of the physical, emotional and financial stress but handled tactfully, caring for your child can be a breeze. Here are seven key tips to help you navigate your way through any financial hiccups.
Readjust your budget
There are plenty of costs that come with caring for a new baby, some of them especially expensive like diapers and formula. Instead of piling up these expenses on your credit card, it is best to readjust your budget to make room for these new overheads, ideally before the baby arrives. You can expect at least a 10 per cent rise in your household budget initially. A pre-planned budget that reflects the additional expenses is essential for smoother cash flow after the baby’s arrival, particularly in the first year. You will, most likely, not come up with the perfect plan in the first attempt, but keep adjusting until you find a plan that works best for your family. Additionally, keeping a track of household expenditure once the baby arrives is crucial. It can be a real eye-opener for new parents.
Arrange health insurance
On the mother’s existing UAE health insurance policy under the maternity cover, a newborn is automatically insured for a period of 30 days. After this, it is mandatory to get individual health insurance cover for the child. If dependents are not covered by the employer, the premium for the child’s insurance policy has to be paid by the parents.
Prepare for a single-income household
Some mothers may choose to stay back home to take care of their newborn. When one spouse is set to quit their job post-baby, financial stress can take a toll since there will be loss of income and other employee benefits in addition to rising expenses. It is important to prepare your finances for such a situation in advance. As opposed to this, opting for childcare in the UAE can be equally challenging since it can cost a small fortune.
Draw up a will
This is as good a time as any to draw up a will, or update your existing will to include your child. In the unfortunate event of something happening to you or your spouse, a will ensures that your assets pass on to your offspring without any dispute. You can also list your child as a nominee for your investments in your will. Another important consideration for parents is to name a trusted guardian for their child.
Start early on education plans
College may seem a long way off, but considering the cost of higher education, it is never too early to start contributing to education plans. It is worth reviewing the many affordable and customisable easy-payment education plans offered by various finance companies, insurers and banks across the UAE.
Buy life insurance
To safeguard the future of your newborn, it is important to invest in a life insurance plan for yourself and your spouse as early as possible. Look for a term life insurance plan that will in the least support your child through college in case of an unfortunate demise of a parent.
Save up
In the process of meeting your everyday expenses and honoring your short-term and long-term financial goals, don’t forget to save. Kids are expensive to bring up. Starting a family not only necessitates saving, but saving more aggressively.