FINANCIAL TIPS FOR EXPECTANT PARENTS
· Welcoming a child in the family is one of the
most anticipated events in a couple’s life.
· However, if you haven’t planned it well, it
could be financially debilitating.
1. Don’t buy
everything
· Don’t start splurging on cute baby stuff the
moment you receive the good news.
· Avoid spending money on expensive toys, clothes
or nursery accessories that your child is going to outgrow within a few weeks.
· Preferably, rent most of the stuff, use hand-me-downs, or buy
pre-owned items online.
· Focus on buying essentials, as the baby is
likely to receive a lot of gifts anyway.
· As you will hardly have time for repair work for
at least 2 years, spend on baby-proofing your house, such as installing smoke
alarms and socket protectors, smoothening and varnishing splintered wooden
furniture.
· Install shelves so you can keep stuff above the
toddler’s reach.
2. Get your finances
in order
· As your budget will go up substantially once the
baby arrives, get rid of high-interest debts or at least pay off as much as you
can.
· Bolster your contingency fund too, since your
monthly expenses will be on the rise.
· Keep at least 6 months worth of expenses in the
contingency fund.
· If both of you plan to work, calculate how much
you are likely to spend on hiring a full-time maid/ nanny.
· If one of you is planning to work, try living on
the income of only one person for 3-4 months to see if you can afford to do so.
· If you want to leave the job for an indefinite
period, withdraw money from the Employees' Provident Fund, and invest it in another avenue, since EPF
won’t earn you any interest if there is no contribution in it for 3 years.
3. Write a Will
· Write/modify your Will immediately to ensure
that your child has no problems claiming your assets as a legal heir.
· You could even appoint the child as a nominee
for some of your investments or accounts.
· Appoint a guardian for your child after taking
that person’s approval.
· Specify the manner in which you would want your
child to be brought up and the assets to be used for rearing it, if anything
were to happen to you and your spouse.
4. Increase your
insurance
· Take a term plan, or enhance the existing one,
after taking into account all your outstanding debts and the amount you will
require to sustain and educate your child for the next 20 years.
· Reassess your health plan too, and buy a family
floater plan that includes your child.
· However, all such plans cover the child only
after it is over 3 months old.
· Some plans provide maternity benefits too, but
you should have had the policy for at least 2 years to avail of this benefit.
5. Start saving for
other goals
· Bringing up and educating a child can cost substantially till it turns 21, out of which at least half the amount will be
spent on education.
· So, start saving early by beginning to invest
the cash gifts that your baby receives in a monthly Systematic Investment Plan of a good balanced equity mutual fund.
· If you begin investing even Rs.2000 a month
after the baby is born in a good balanced equity mutual fund, you will have a
corpus of about Rs.12 lakh by the time it is an adult (assuming 10% return).
· However, don’t reduce investing for your own
goals, specifically retirement.
· Remember that you can get a loan for your
child’s education, but you won’t get one to sustain you during your sunset
years.