With a new baby you probably feel as if you’re learning everything again from scratch, so the last thing you need is to make rookie mistakes when it comes to your new family finances.
The arrival of a new baby brings a whole new set of money issues, from childcare and medical costs to clothes and cots. When you’re stressed or under pressure, you’re more likely to handle your money in ways that solve problems immediately, but aren’t the best long-term move. But as the saying goes, forewarned is forearmed. Here are five common pitfalls to avoid.
Overspending on baby items: Be honest – do you want that $2000 pram because it perfectly suits your needs, or because it’s a favourite with celebrity mums? Another mistake is buying items that have been recommended by friends who have a very different lifestyle: that three-wheeler pram won’t be much use if you’ve never jogged a day in your life and never will. Don’t get caught up in buying baby equipment based on a brand name – but of course, never scrimp when it comes to safety.
Failing to factor in childcare: After the first year (or perhaps even earlier), you’ll be faced with the question of childcare. With some centres charging $100 and up per day, will you be able to carry the cost? Start a high-interest savings account early on so you won’t face such a shock to the budget when you decide to go back to work.
Assuming you won’t qualify for Family Assistance: Get acquainted with tax benefits, as you may be surprised to learn what you’re eligible for.
Ignoring insurance: It’s the last thing you want to think of, and you really could use the money you’d spend on a new insurance policy, but your top priority now is ensuring your dependents are provided for. Seriously consider life insurance and income protection policies for you and your partner – if you’re faced with the unexpected, would one parent be able to cope?
Saving under your child’s name: Do this with the understanding that your child will be free to use that money as they please down the track. If you want to avoid a scenario where your 18-year-old plans to use the funds you’d scrimped and saved for university on a backpacking trip or a year off from work and study, then start a separate savings account under your name. Compare current savings accounts rates to see how far your savings could go.