New parents are often aware of the sleepless nights and constant care that comes with having a new baby. However, what can take them by surprise is the costs that come with their bundle of joy.
According to recent figures released by Choice before you’ve even left the hospital with your baby, new parents can be slugged with bills up to $8k if they’ve opted to use the private health care system. Whilst those who have gone public for their child’s birth may have spent as much as $1500 along the way to cover the costs of scans and pathology tests made outside of their designated hospital. Not to mention the additional expense that comes with setting up for your first child. From cots and prams and baby seats to practicalities like nappies and formula – nothing is cheap! So how can you get your finances back on track?
Budgeting is key
Start by setting out your household expenses. From home loans or rent, to insurance payments, car payment, groceries and utilities, nights out and special treats. Once you know where your money is going you will have a better idea of where you can save and also work out how much you will need to meet future expenses.
Scrap your credit card
Before your baby is born, it’s a great idea to pay off your credit card(s) if possible. If you don’t have the ability to pay it off, see if you can do a balance transfer to switch to a card with a lower interest rate.
Check in with your lender
Some home loans have an option that allow new parents to make lower repayments or no repayments whilst they are on parental leave. There are usually conditions to this feature, such as you must have employment to return to after your parental leave period expires – but it is worth exploring the option.
Start a savings plan
Kids cost money… Loads of money. From day care to education to after school activities. It is estimated the average Australian will spend close to $500,000 from birth ‘til a child leaves home at 18. While social researcher Mark McCrindle suggests the cost is closer to $1million when you consider Generation Z who have been brought up having everything they desire – from iPads to hip hop classes.
“Generation Z, born since 1995, are the most financially endowed generation of children ever. Every child has their own set of everything. We are not in the era of shared toys or hand-me-downs,” he said.
With this in mind, it’s important to start a savings plan as soon as possible for your child. Consider a high interest online savings account. You should also think about setting up an education fund.
It costs how much?
It’s also worth noting that according to figures from IBIS world the average Aussie spent over $20k on essential items during their child’s first four years. The majority of these purchases usually occurred during the first twelve months from birth as parents set up for their new arrival.
Don’t buy new
Still there are ways to cut back on these costs. You can often find bargains if you are prepared to buy used. Purchasing second-hand items such as clothes and toys and nursery furniture can save you a bundle. And always be prepared to shop around. You will be surprised how much you can save if you are prepared to put the time in to comparative shop.
Remember a lot of these new expenses won’t last forever. From nappies to formula and day care, one by one they will get crossed off you list, leaving you with a little wriggle room or more funds to put aside for saving or family activities.
Lastly don’t forget to enjoy your baby. This is a precious time for you and your family. Make the most of it!