Starting a family, whether it be taking those first steps of planning or knowing your baby is on their way, is exciting – and expensive. Before you start thinking of paint colours for the nursery, it’s wise to understand the costs involved in raising a child.
Knowing the costs
While there’s no set cost to raising a child, with many variables to take into consideration, a University of Canberra study found it costs a middle-income family $812,000 to raise two children until they leave home.i
Even before your child enters the world, there are costs. If you choose the public hospital system (which three quarters of pregnant women in Australia do), you won’t be out of pocket much but there can be some expenses, such as paying for additional ultrasounds and medications.ii Private hospitals are estimated to cost anywhere between $2,500 and $20,000 with private health insurance.iii
You will need to buy baby furniture and a car seat, and there will be the ongoing costs of nappies and clothes to keep in mind. Other factors, such as whether baby is formula fed and how soon you introduce food, will also impact your finances – some of these can be planned for, while others are more challenging.
What you are entitled to
If this all sounds a bit daunting, remember that there is financial support available. Depending on your/your partner’s work situation, you might be able to access paid maternity/paternity leave.
You might also be eligible for the Australian Government’s Parental Leave Pay, an 18 week payment at the minimum wage, which the primary carer receives after the birth of the child. There is also a Dad and Partner Pay, a payment for up to two weeks, also at the minimum wage and a Child Care Subsidy which is paid directly to your providers to reduce the amount you pay, should you be eligible.
Creating a family budget
Whether you have an existing budget or this is your first time creating one, you will need to take into account your growing family. Consider your living expenses and mortgage or rent, and whether this will cover your family or not – will you need to renovate or move in the near future?
Also take into consideration childcare costs. It is estimated that an average-earning Australian couple with two young children spend around 17% of their income on full-time childcare.iv Budgeting for future childcare costs will mean these won’t take you by surprise and it can help you make decisions around work and childcare arrangements.
And while your focus might be on the immediate future (and therefore a newborn baby or toddler), don’t forget to plan for the ongoing costs for your growing child. Of course, there are things you can’t plan for, but you can still think ahead.
When it comes to deciding on public or private education, you can use the Cost of Education Calculator to get an idea of how your finances will be impacted. This can then be taken into account in your family budget.
Protecting your future
When your family expands, it is a good time to update your will. While not a topic many of us want to dwell on, thinking about what would happen to our family when we are no longer around is important – you will want them to be taken care of.
Once children come on the scene, the need for life insurance is even greater. If something were to happen to you or your partner, then the financial burden could be significant. Who would look after the children? Could they stay at the same schools? Could your partner pay the mortgage on one salary?
Income protection, life insurance, trauma insurance and total and permanent disability may be considered. Another consideration could be to cover both partners even where one isn’t working as the costs associated with childcare and household tasks can be substantial.
This new chapter of your life, whether it is beginning or in the planning stage, is an exciting and special time. By planning as best as you can, you’ll make the transition smoother when it comes to financial matters. We’re here to help, so reach out on 1300 79 80 38 for advice.
If you would like assistance getting your accounts under control as we approach the end of financial year, call us today on 1300 79 80 38.
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At Assure Wealth we specialise in helping busy, successful families structure their finances to achieve greater wealth and financial peace of mind.
Author: Pat Casey – Managing Director & Financial Planner Sydney – Assure Wealth
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Disclaimer: The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Walker Lane Pty Ltd Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Walker Lane nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.
Assure Wealth Pty Ltd ABN 31 965 466 780 Corporate Authorised Representative no. 1244817, Patrick Casey Sub-Authorised Representative no. 1244748 of Walker Lane Pty Ltd ABN 70 626 199 826, an AFSL holder No 509305.
