Our Financial Checklist for Expecting & New Parents
Whether you are expecting or a new parent, it is important to take the time and assess your finances.
I’ve detailed three areas to address with your advisor (and if you don’t yet have an advisor, its time to find one).
Budget: Sit down and map out how having a child will affect your household income -this step is one most will consider but may not do so thoroughly. What does your income look like during maternity leave, how long will you take, will one of you return to work in a reduced capacity, or not at all? Next, consider the increased costs around childcare, clothing, food etc. Then, take our your bank statement and look at where you spend and where you may be able to reduce your outgoings. Try using the MABS budget tool if you need help. Can you switch broadband or energy suppliers? There are great online comparison sites to help. Understand your entitlements and workplace policies. Knowing what is incoming & outgoing ahead of time will alleviate a lot of stress and help with the next two steps.
Protection: Assess your life insurance and income protection needs. Get the details of your work provided benefits and talk with an advisor on any gaps of cover you may have. Many first time parents will not have any life cover, this should be prioritised -this is an area you cannot go back and ‘fix’ after the unoforseen occurs. Work out how much your partner would need to meet the household outgoings without your income -covering this figure will likely be far less expensive than you anticipate. With a new baby at home, a 4x salary death in service benefit will likely not suffice. When considering your needs, consider any workplace benefits one partner may lose if they do not return to the workforce. Homemakers do need cover and are often uninsured, replacing their contribution to the household is costly. Note, you can apply for life cover while pregnant, without issue.
Future Provisions: Discuss your plans with regard to future education costs -what you wish to pay for and how much that is likely to cost. A guide on costs here. Make a plan to save to meet that figure, if maternity leave has your budget at capacity, make your plan to begin saving when your income allows -having a plan is important even if it is deferred. If one of you is returning to work part time or not at all, talk with your advisor about how this affects your pension funding. What changes need to be made to ensure you can still reach your retirement goals. Compounding interest is powerful, smal changes to your funding can be quite impactful to your pension.
Queries regarding the above? Contact me anytime.
Rachel O’Shea, Senior Consultant & Protection Manager