Having a child is a blessing. It’s also a huge responsibility.
If you’re bringing a little person into the world, you need to be organised. Part of this means having a financial plan in place, and crucially, it means executing that plan.
The problem is, you have a lot of other important stuff going on – like mentally preparing for pregnancy, the birth and of course, becoming a parent. So, we’ve put together a handy overview of 5 financial moves you can make when you know you’re having a child.
When it comes to saving, the most important thing is getting started.
Being responsible for others means planning ahead. First and foremost, it means having a safety net, in case something goes wrong with your income and you need emergency funds to see you through until you can put it right. So, if you don’t have a buffer, start setting aside money each month to give you 3 to 6 months of financial breathing space.
Finding out that you’re having a child is exciting and wonderful. Making a will at this point might seem a little depressing and scary, but it’s essential. You owe it to your family to ensure that your financial affairs are in place should something happen to you. In the aftermath of your passing, the last thing you want is a financial mess for your partner to wade through. And should the unimaginable happen and both you and your partner die at the same time, it’s even more important to ensure that kids are provided for and taken care of.
A will takes care of a couple of crucial issues for parents and families: how your assets should be distributed, and who will take care of your children when they are still minors. Thankfully, it’s easy to do. There are several options available to you – you could speak to a specialist lawyer (perhaps one referred by a close friend or family member), which is a good idea if you have a large estate or complex needs. If your requirements are more straightforward, you can make a will via an online platform. In other words, making a will doesn’t have to break the bank, so don’t let the perceived costs stop you from taking action.
If you’re having a baby, life insurance isn’t a nice-to-have. It’s a need-to-have. This is especially true if you have ongoing liabilities, like a mortgage, or car lease payments, or any other long term monthly outgoings that your family would be lumbered with in the event of your death.
A key question to ask is, how much cover do you need? A simple way of estimating this is to cover ten years of income, but you may wish to sit down and go through the numbers, including costs like mortgage and car payments, everyday expenses, education for your children and other critical factors.
Life insurance can appear intimidating, but it needn’t be. Most people opt for a “term” policy that requires payment of a premium every year (or every month to help manage the costs), and in return, the insurer pays out a predetermined amount of money to the beneficiary of the policy if in the event of your death. To ensure you choose the best type of life insurance for your needs, understand the pitfalls to reduce costs as much as possible, check out this handy guide.
Once your child is born, you’re faced with a big decision. Will you or your partner go back to work, and who’s going to look after the little one during the week? Who knows what the future holds, but it’s worth having a sense of how you will handle childcare before your pride and joy arrives and everything changes.
It’s worth researching your options and checking availability well in advance, as childcare can be hard to come by. Whether it’s a nanny, childminder, nursery or the opportunity cost of one of you remaining at home with the child, the costs quickly rack up. By putting money aside during the pregnancy, you can focus on enjoying your time with your child when they arrive, rather than worrying about the financial implications of handing their care.
When you discover you’re going to be starting a family, taking care of the downside risk is the near-term imperative. That means ticking off the basics – establishing an emergency fund, making a will, getting life insurance and figuring out childcare.
We’ve already underscored the importance of these moves, creating a solid foundation for you and your family. But over the long term, it’s equally important to begin investing and building wealth, so that you can take care of your loved ones all the way through to retirement and beyond. The earlier you start, the more you can benefit from the magic of compound interest, which will enable you to accelerate wealth building.
Planning for the future is one thing – executing is another. That’s where Sarwa comes in. We make it easy for anyone to get started with investing. Our automated online platform does the hard work for you, so you can focus on your child and enjoy being a parent.
Ready to invest in your future?
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