by Catherine Fowler - Nursery Collective Money Expert
The cost of having a baby is something all new and expecting parents need to consider - and the earlier you are prepared, the better! I am super excited to share our first blog from our Nursery Collective Money Expert, Cath Fowler, with her top tips around the cost of having a baby, and the best ways to budget for the newest member of your family.
The Cost of having a baby: How to budget for your new addition
Having a baby or adding another little bub to your family is an exciting time. But it can be a daunting time too. When you think about the extra cost of having a baby and the impact a loss of income might have, it can feel slightly overwhelming.
For me personally, I have had two daughters and being the primary breadwinner in our family at the time meant the drop in income was certainly going to require some juggling.
The good news is if you’re reading this when pregnant you have some time to get a few things in place. I’ve put together my top tips for how to budget for a baby.
The Cost of Having a Baby: Medical costs
If pregnant you will need to have already had private health insurance in place if you are opting for a private hospital due to insurance waiting periods.
If going down the private hospital route out of pocket expenses can be around $8,500 according to Medibank Private figures in 2015.
If you opt to have a baby in a public hospital most expenses will be covered by Medicare. But you may have to account for some ultrasound and medical tests as well as birthing classes. For me the only out of pocket expense I had with going public was for the optional 12 week scan.
The Cost of Having a Baby: Start a budget
If you don’t have a budget in place currently, start one now! Begin with adding up all of your current income and expenses. The best way to get on top of your finances is to track your spending- at least for a few months until you can see a regular pattern of where your money goes.
From here you will need to create a modified post-baby budget. So take away any income you earn that you won’t receive when on maternity leave, but be sure to include any government entitlements of maternity leave pay from your employer.
Add in the additional expenses once baby arrives. There are three main baby related costs that you need to consider.
Medical expenses - as mentioned above this can be anywhere from a couple of hundred dollars all the way up to many thousands.
Initial baby costs - for items you will need from the beginning such as a car seat, pram, bassinet, clothes, nappies, bedding and a bath. Depending on the brands you by the costs for all of this can be anywhere between $1500 - $5000.
Ongoing baby expenses - things like nappies, wipes, clothes as they grow, formula, baby shampoo. There is lots you can add here but a reasonable guide here would be anywhere from $50-$100 a week.
The Cost of Having a Baby: Check government entitlements
In order to work out your post-baby budget, you will need to get an idea of the government benefits that are available. Parental Leave Pay, Family Tax Benefit and Dad and Partner Pay are the likely entitlements. Depending on your income and assets Parenting Payment, Rent Assistance and a Health Care Card might also be available.
Incorporate these benefits into your budget remembering that they may not last the whole time you are on maternity leave. So your budget may need to change over time.
I suggest applying for these benefits a good few months before your baby is due. Then you will just need to advise them of baby’s birth date before payments start coming through. If you leave it until baby is born, you can find yourself needing to wait a few months before your entitlements start to come through.
The Cost of Having a Baby: Save the difference between your current wage & government entitlements
During your pregnancy if you still have two wages in the household, aim to save the difference between your income and what you will receive in entitlements once baby comes along.
This way you are already getting in the habit of living off the reduced income and the cost of having a baby will have less of an impact.
With this savings you can use the funds in the following way:
- Reduce down any credit card debt
- Purchase the initial baby items
- Start an emergency fund. Aim for $1000 at first. Then if budget allows you want to build this up to two or three months of living expenses.
The Cost of Having a Baby: Shop smart for baby items
While there are some things like a cot mattress that I would suggest buying new, many of the big ticket items like a pram, cot and change table can be picked up second-hand. Firstly check out the cost of buying the item new and then check out local buy swap and sell sites, gumtree and ebay to see if there are any items in great second hand condition that you can use. Family and friends are also a great source of hand me downs.
By taking care of the big-tickets items cost-effectively this can leave you with budget to spend on quality bed linen and sleeping bags.
If you are a first time mum you will likely receive some great gifts from a baby shower. Of those close to you, most will be comfortable with you suggesting what you need as it takes the hassle out of gift shopping.
Maternity clothes are also great to buy second hand or try and purchase items like maxi dresses that you can wear while breastfeeding as well.
Another good option is to weigh up the cost of buying new or hiring. Baby capsules can make life easier but they have a limited life span so hiring one could be a more economical option.
The Cost of Having a Baby: Look at childcare costs
Once bub comes along most of us want to spend as much time at home with them as we can. But the reality of today is that most new mums need to go back to work eventually.
Before you go back to work determine what your child care expenses will be. There is a handy calculator on the Department of Human Services website that is a great help.
I am not a big fan of comparing the childcare costs just to the mums wage to determine if it makes financial sense to go back. There are lots of other great benefits of returning to the workforce if that is what you want to do, so the child care benefit should be seen as a household expense instead.
The Cost of Having a Baby: Protect yourself
While this one isn’t something we like to think about, once you have children we really do have a responsibility to them that we have our financial house in order.
- If you do not have a will in place getting one drawn up is important. You will also need to think about asking someone to be the guardian of your child if something was to happen to you or your partner.
- At the same time take the chance to review your insurance options. Do you have the appropriate level of cover in the event of death or permanent disability. Your Super fund will likely have this but you will want to check what you are covered for and if cover continues if you are not making contributions.
- Do you need income protection insurance if you or your partner were not able to work for a period of time?
I know these are not the most riveting things to think about, but they can certainly help ease your mind and leave you to enjoy the precious cuddles with your newborn.
So when it comes to the cost of having a baby - there is no doubt your finances will be impacted by this change, but as a mum of two, I can hand on heart say my girls are the most priceless gift I could ever receive.