Babies are breaking Aussie budgets as new parents break out the plastic
New Mozo research has shown that newborn babies are putting their parents under financial strain, with 70% of families reporting feeling the pinch during their baby’s first year.
Mozo’s survey revealed that while nearly half of all expecting parents are making an effort to prepare for their baby’s birth financially, many are still struggling to cover the costs that come with welcoming a new member of the family.
“Having a baby is a major milestone in life and a joyous one at that, but there are financial implications that come with welcoming a new baby into your family. The cost of the first year of an infant’s life is hard to pin down but is estimated to cost parents anywhere between $3000 - $15,000 depending on what you buy,” said Mozo Director Kirsty Lamont.
One in five parents said the cost of a new baby - including everyday needs like nappies, wipes and formula as well as major, one-off items like cots, prams and car seats - was higher than they’d anticipated. And that’s without even mentioning the sky high cost of daycare, which has seen parents increasingly turn to grandparents for help.
Another one in five new parents have had to resort to returning to work sooner than planned in order to get some financial relief, while one in ten are relying on credit cards to cover expenses, which Lamont said can put them on a treacherous path.
“A credit card can be a great budgeting tool when used correctly, but when you start really relying on your plastic for everyday expenses, that should be a red flag that you need to have a long hard look at your budget, and try to come up with some other ways to ease the strain,” she said.
“Making a budget and being aware of your incomings and outgoings is crucial to stay financially afloat when managing the cost of a new infant. There are sure fire ways to keep costs down including buying second hand for big ticket items and purchasing necessary items like nappies and wipes in bulk or on sale.”
But the good news is, there are plenty of options for new parents struggling with the cost of a baby and trying to secure their family’s finances.
“Set up a registry of essentials so loved ones can chip in to help with costs, look online for baby budgeting templates, join parent groups online and find out what you are entitled to in terms of parental pay and child care subsidies,” Lamont suggested.
And for those new parents who are turning to plastic in order to manage the family budget each month, it’s a good idea to review your current card, compare your options and make sure you’re using the right plastic for you.
“There’s a world of difference between the right credit card and the wrong one. You might be surprised how much finding the right fit could affect your budget,” said Lamont.
Types of credit cards and who should use them
- Low rate cards - If you find yourself putting nappies, formula and other baby necessities on your card and then struggling to clear that balance every month, a low rate card might be a good choice. This will minimise the interest you pay on lingering balances - just keep in mind there may be an annual fee to contend with.
- No annual fee cards - For those parents who pay off their credit card bill in full each and every month, a credit card with no annual fee will help keep costs to a minimum. This might be the perfect fit if your credit card is a budgeting tool to help with big purchases, like a pram or bassinet.
- Balance transfer cards - Already got a bit of credit card debt racked up? A balance transfer card with a 0% interest period can be the perfect way to clear that lingering balance and get yourself back on the right track. Just remember that any new spending on the card will be charged interest at the regular amount, not at 0% like the transferred balance.
- Rewards cards - Another one for parents who pay their bill off in full and on time each month, a rewards card is great for parents looking for a little extra bang for their buck. Plus, with all the big spending you’re doing on your newborn, you’ll have a stash of points in no time.
- A debit card - Ok, so it’s not a credit card, but a debit card is also a great plastic option for new parents who want to avoid the slippery slope of credit card debt. If you can manage to streamline your budget and stick to debit, then that may be a better solution than leaning on credit when things get tight.