Kiddipedia

Kiddipedia

Having a baby may be a blessing, but it’s one that comes with a hefty price tag. 

And at 34 weeks into my first pregnancy, the costs have already started piling up. From the must-have bassinet (the Snoo) to the frequent medical appointments and even the baby shower, it’s clear the kid’s expensive – and she’s not even here yet.

With Australian cities regularly topping the list of most expensive places in the world to live, raising a child here is no light undertaking. You can expect to fork out an average $18,255 per year for children under 12, according to Finder research, or over $32,000 for two kids, on things like food, holidays, toys and schooling.

As daunting as that sounds, for someone who writes about finances and investing for a living, I like to think I know a thing or two about planning for the future. 

So, armed with all the false confidence that only a new mum can have, I thought I’d share my personal money checklist in preparation for a (finger’s crossed) future-proof motherhood. 

  1. Craft a Realistic Baby Budget

It’s obvious, but it has to be said. It’s not just about the one-off baby gear purchases; it’s the ongoing costs that really add up. I started by jotting down all expected expenses, including childcare, healthcare, nappies, and yes, those irresistible baby outfits. 

You can do this in excel though I’m using a budgeting app. It’s been a lifesaver for tracking my spending and sticking to my budget. 

Once you have your list, you can add in your expected cash flow – whether that’s from your parental leave entitlements or partner income – to work out what’s realistic and what’s not. 

Just don’t forget to set aside a little extra for unexpected costs, because babies are full of surprises.

  1. Set up a high-interest savings account for their future

To give our kiddo a head start, we’re planning on opening a high-interest savings account under their name and then making automated payments each month.

Don’t worry if you can’t commit to much at this point. The most important thing is finding a routine that you can stick to and getting a competitive interest rate. 

By not having your funds in a high rate savings account (or term deposit), you miss out on all that sweet compounded interest.

For example, let’s say you planned to put aside $200 per month, starting with a $500 deposit into an account with a 5.5 per cent rate. After 18 years, you would have $74,877 saved up, as you would have earned $31,177 in interest.

Meanwhile, If you’d decided to leave that cash in a zero rate bank account (or under your mattress), you’d have just $43,700 saved up. Talk about an opportunity cost.

Make sure you check with your accountant or look at the tax implications for your particular circumstances as it may be more beneficial to create a separate offset account for your child instead, if you have a mortgage.

  1. Keep Super in Check During Maternity Leave

While parental leave can leave a major dent in your savings, it’s easy to forget that your super balance may also be taking a hit.

In fact, just one year of parental leave costs the average woman $16,800 in lost super, according to a Finder study. And if you decide to work four days a week for the first two years, that jumps to a whopping $39,500.

While the government’s paid parental leave scheme excludes super, some companies will continue to make contributions throughout your parental leave, so it’s worth checking your firm’s policies.

If you’re in the unfortunately common position where super payments are expected to cease altogether during your parental leave, it pays to think about contingencies.

I admit to playing catch up here. While I’m lucky to work for a company that pays full super benefits during my paid leave, that won’t cover me for the full period I’m taking off. So over the next few weeks, I plan to contact my super fund to understand my options as well as any penalties for not contributing for a certain time, such as losing insurance benefits. 

From there, I’m going to look at making salary sacrifice contributions with financial help from my partner. I’ll be prioritising this over my stock market investments because of the excellent tax benefits you get through super – concessional contributions are taxed at 15 per cent (up to a cap of $27,500).

If you have a partner, you can also look at splitting pre-tax super contributions with them. This ensures the retirement kitty keeps growing, even when you’re in full-time mum mode.

  1. Insurance Overhaul: Protecting the Family

With a new family member, revisiting your insurance policies is crucial. 

If you have a private health insurer, check their rules around newborns to ensure your baby is  covered from birth. In some cases, you’ll need to update your plan several months to a full year prior to giving birth.

I’ve just updated my health insurance to a family plan, ensuring we all have comprehensive coverage.

Life and income protection insurance are next on my list. It’s about making sure that, should anything happen to me or my partner, my family’s financial future isn’t left in the lurch.

  1. Consider Low-Risk Investments

Building up savings is crucial, but the best way to grow that wealth is by investing. As an avid investor entering motherhood, for me that simply means taking a few less risks.

I was lucky enough to buy a property a couple of years ago which I plan to keep as an investment. I also hold a portfolio of about 20 stocks and I make regular automated contributions into a couple of ETF index funds.

I’m planning on shifting some of my stock portfolio away from riskier assets and building up more of a dividend portfolio. Dividend stocks are great for creating a passive income because you earn money from them without needing to sell any shares – so they’re an income generating asset that can be passed down over generations. 

Before you start investing, make sure you’ve paid off any high interest debts and have an emergency fund set up. It may also be a good idea at this stage to chat with a financial advisor who will be able to take your personal circumstances into account.

So there you have it, my personal roadmap to navigating the financial side of motherhood. It’s about being proactive, making informed decisions, and sometimes, just going with your gut. Here’s to a financially savvy journey into motherhood.

 

Kylie Purcell is Finder’s Investments Analyst, accredited in Securities and Managed Investments (RG146), and expecting her first child in December 2023. As a leading investments commentator with over a decade of experience, Kylie’s passion is to help people learn about investing. Kylie’s expertise covers all areas of investments, while specialising in financial products including online trading platforms, robo advisors, stocks and ETFs, as well as digital assets and cryptocurrencies such as Bitcoin.