Financial planning: How to plan ahead for a family

Becoming a parent brings with it a whole new level of responsibility. Here are ten things you can do to plan ahead financially when you’re about to start a family.

New baby, new responsibilities

Starting a family is an exciting milestone, but it also comes with significant financial responsibilities.

No amount of planning can truly prepare you for the life-changing moment of becoming a parent for the first time. Along with the sweet anticipation of cuddles, smiles, and overwhelming love, it’s normal to feel a little daunted by the immense responsibility ahead.

That’s why it’s a good idea to plan ahead. If you’re preparing to start a family imminently, or you’re already expecting a baby, here are ten things you can do to ensure that your finances are in great shape to support the new addition to your family now and over the long-term.

 

Ten ways to plan ahead financially when you’re starting a family

1. Build an emergency fund

While winging it is a possible, if inadvisable, option when you only have yourself to look after, it’s irresponsible to do that once a child is in the mix. It’s essential to have a safety net for unexpected expenses such as medical bills or a job loss when you have dependents. Aim to save between three and six months’ worth of living expenses in an easily accessible account.

 

2. Review your budget & expenses

With a baby on the way, how you spend your money on is about to radically change! You may have to make some adjustments to your budget to accommodate all the expenses that come with a new baby, such as childcare, medical expenses, and baby supplies. If disposable income is limited, identify areas where you can cut unnecessary spending to make room for new family-related expenses.

 

3. Plan for medical costs

Maternity and paediatric care doesn’t come cheap. Many expats in Asia don’t benefit from the state support they may have back home, so now is the time to review your health insurance to ensure that it covers everything you need. Maternity cover can be a tricky one as many policies come with a waiting period before benefits take effect. Depending on the insurer, this waiting period can range from several months to over a year, so ideally you should secure coverage well in advance of pregnancy to avoid significant out-of-pocket expenses for prenatal care, delivery, and postnatal support.

Hopefully, your baby will be fighting fit and glowing with health, but comprehensive medical insurance will give you peace of mind that if they do experience health issues, you’ll have swift access to the best possible treatments.

 

4. Reevaluate housing needs

It’s worth considering your living space and assessing if your current home is suitable. If you’ll need more space, the more time you have to find a new property, the better. If you’re planning to buy a new home, factor in a mortgage that fits your budget.

 

5. Protect your family with insurance

Life insurance and critical illness cover might have seemed like disposable nice-to-haves when you were single, but once you become a parent, protecting your loved ones against unforeseen circumstances becomes a priority. If you don’t have these policies in place, have a chat to your financial adviser to benefit from rock-solid financial protection, whatever life throws your way.

 

6. Start planning for childcare and education

There are short- and long-term considerations to factor in here. Unless one parent is planning to stay home with the new baby indefinitely, you’ll need to research the cost of daycare or a nanny. It’s a significant monthly cost to plan for.

Over the longer term, you should also think about future education costs. If you want your child to attend an international school, you’ll need to budget for that. And while it may seem like eons in the future, starting to save for university fees now will save a lot of financial strain when your baby is ready to fly the nest. Why not speak to a financial adviser about a fee plan to spread the cost of university over the next 18 years and benefit from compound interest to boost your savings?

 

7. Manage debt & build credit

Paying off high-interest debts, such as credit cards and personal loans, before starting a family can significantly reduce financial stress. Prioritise debt repayment on high-interest credit cards and personal loans now, before the baby costs really kick in. This will free up future resources for essential expenses.

Additionally, maintaining a good credit score will improve your chances of securing favourable loan terms for major purchases like a family home.

 

8. Update legal and financial documents

If you don’t already have a will, starting a family should be a catalyst to getting this important job done. No-one wants to think about death when you’re bringing a new life into the world but it’s important to clearly state both where you want your assets to go and to name guardians for your child.

In addition, don’t forget to update beneficiary designations on any life insurance policies that you have.

 

9. Maximise parental benefits

You’ll want to spend as much time as you can with your new bundle of joy, so check with your employer well ahead of time about maternity/paternity leave and any family benefits offered and plan your time accordingly.

You may also be eligible for childcare subsidies or universal child benefits, depending on where you live, so research carefully so you don’t miss out on anything you are due.

 

10. Continue saving for retirement

Your family is important, but so are you. While it can be tempting to prioritise your kids over your own needs, it’s not a good idea to sacrifice your retirement plan. It’s important to remember that your child will be able to access loans for their university education whereas you can’t get loans for retirement! If there is a choice to be made, prioritise retirement planning over education planning. Hopefully, with good financial planning, you’ll be able to afford both.

 

Infinity can help you plan ahead if you’re starting a family                                                                                                                            

If you have any worries or concerns about any of the points raised in this article, our incredible team of financial advisers, many of whom are parents themselves, would be happy to help you get your financial planning in shape before you welcome your new addition. Why not get in touch?

Life is about to get hectic – take the time to do it before your baby arrives and ensure that you’ve done everything in your power to protect your child financially both now and in the future.