03 Sep Thinking of starting a family?
We’ve asked Luke Grundy, our resident financial planner, to highlight some of the financial considerations when thinking about planning for a family.
Starting a family is one of life’s big decisions, if you are lucky enough to get the chance to plan this or even if you have just received a happy surprise there are a few things you need to think about in a financial sense before Bubs comes along.
Here are our top five tips of what to start planning:
- Planning for one Income
This may seem like a very obvious place to start but a lot of people don’t take this into account, and don’t plan well enough for this. If you are currently struggling to pay your bills with 2 salaries then life is only going to get harder when you go down to one income. Even if you are currently comfortable with your budget, losing a salary is going to have a major impact.
What you need to do is really understand what it costs you to live at the moment and start getting rid of anything that you do not really need in your budget, then you need to budget using one salary and potentially any other income you may receive and see what your budget looks like then, if needed start reducing more costs and repeat until you have a budget you can work with.
- Emergency Fund
Whilst an emergency fund is always something that we recommend for our clients, when you are planning for a family this is imperative.
Babies are expensive and also, they are very unpredictable. There are always costs that you haven’t foreseen and your best laid plans are always waylaid. Having an emergency fund will relieve a lot of stress from the situation.
- Government help or not?
Depending on your circumstances you will receive help from the government in the form of Family Tax Benefit A & B, Newborn upfront payment, Parental leave payment and Dad and Partner pay.
There rules around who is eligible for the above payments, but finding out if you are and then factoring this into your budget as soon as possible will help relieve the stress of having to handle all this once you have a newborn in your care as well.
- How flexible is your employer?
Understanding and working through the rules and payments that your employer will give you is an important point of the financial planning part of starting a family. How long will your employer pay you for whilst on Maternity leave? Do they offer extended Maternity leave at a reduced pay? Do they offer Paternity leave for your partner? How flexible is your work arrangement when you return to work and what are your options around this?
A lot of people become stressed and scared to discuss these subjects with their employer out of fear of them being looked at differently if they are looking to take time off – but understanding your rights whilst on Maternity leave is crucial.
- Returning to work – Does it make sense?
The first question we ask new mums about returning to work is –
“Are you returning to work for financial gain, or for your own personal gain?”
What we mean by this is, is the reason for you returning to work because you need the extra money to help out around the house and with the budget, or are you returning to work because it will help your career or you just want to be around other adults and take back some of your own life?
Either are perfectly acceptable answers and the choice is always a personal one, however from a Financial Planning standpoint the planning element is vastly different.
If you are returning to work for personal reasons then the money you are gaining from the work isn’t the main priority. However, if financial gain is what we are after we need to look at the cost of care whilst you are in work, does it make sense to go back 3 days or 5days – what does the cost of childcare look like and are you earning more than the cost of childcare. Is the financial benefit you are gaining worth it?
As with everything we do with our clients, all of these questions need to be answered by you and the advice based on your relevant circumstances as each person’s family and wishes are different from the next.
The ATO has some amazing resources on this very subject and Centrelink can be very helpful as well, check out this website below for a good starting point:
If you’d like some assistance (obviously not in the baby making part!), then you can get in touch with Luke via email email@example.com or call 0401 637 907.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.