Having a baby is one of life’s magical moments. Parents enter to a whole new phase of life which is exciting as well as nerve-wracking. And beginning of a new chapter in life means there’s so much to prepare for. Right from baby-proofing your home to financially preparing yourself for all the added responsibilities of life, there’s much to take care of! Ideally, planning for a baby in financial terms should start a year, or even two years, beforehand to ensure there is enough money tucked away to cover maternity leave and that other arrangements, such as life insurance, are in place. But not just the time of birth, planning should start at every stage taking into account your expected income, budget, current and additional expenses. Here are few financial must-do’s to prepare for a new baby. Read on.
Check on your finances
First thing first – know where you stand financially before you have a baby. And this formula applies in every stage of life. Knowing your net worth, income, expenses, etc. can help you set budgets and be well prepared for added responsibilities of life. It also means getting your credit reports and paying your bills. It’s crucial to know your finances in and out at all times!
If you have a lot of debt before you have a baby, there’s a good chance you are going to add to it once you have a baby. So make sure to be debt free with the exception of long term debt like home loan before even planning to get a child in life. Getting your debt under control will give you financial margin in your life so you can focus on the priority and set your future goals accordingly.
Ensure you have Health Insurance and Life Insurance
Medical costs aren’t all that cheap in India and giving birth is no exception. Make sure you invest on a good insurance cover that will cover the cost as much. There could be a discrepancy between the medical bills and your insurance coverage. You should check with your provider as early into your pregnancy as possible to estimate what your bills will be. Once you have the estimation, you can set aside a portion of salary each month to go towards the medical bill. You should also spend on life insurance policy. A good calculation for this is five times your earnings, plus any household debt and college tuition fees.
Emergency Funds are for a reason
Most of us give importance to savings and insurance but there’s a lot of importance attached to emergency funds. We can never be certain about the uncertainties of life, so we might as be well prepared with the backup of emergency fund. You should budget in for savings so that you’re prepared in case there is an emergency. This could help if you or your partner decides to be a stay at home parent, then you have a safety net, or if there’s an emergency, like home repairs, you will have your emergency fund to pay for it.
Start saving for child’s education
Education is expensive, be it in our country or abroad. Although this may seem like a long term goal but as parents you should prepare for it as you enter parenthood. Look for Educational accounts that will have tax advantages, but they may come which certain conditions, such as the funds can only be used for educational purposes. Various plans are available in the market. You have to pick the ones that fit your goals for your child’s education.
Consider opening a Savings Account for your Child
You should open a savings account for your baby. Look for one that has no fees and no balance minimums. You could link it to your checking account so you can watch your child’s savings grow, and automatically transfer funds into it. It’s a healthy practice and your child could use these funds at the right time in his or her life.
It can seem like you have a lifetime to prepare for your financial future, and that of your child, but time passes quicker than you realize. So one should act beforehand to reduce stress and ensure a happy and secured financial future of your family!
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