Expanding your family to include ten tiny fingers and toes of a new born baby is an emotional milestone that many of us look forward to. An infant who is completely and unconditionally dependent on your love, attention, care and guidance can bring shine and joy into your life, but it can also turn your life in a different direction altogether.
In such celebratory times, sharing life’s joys is going to be more on your mind than thinking about money matters. However, more than any other time or event in life, being financially prepared for welcoming a third member into your family is of utmost priority if you want to enjoy this new phase in your life, stress free.
If you haven’t given it a thought yet, then stop for a minute and think about these three steps to be financially prepared to welcome your baby.
1. Budget for higher expenses
Sorry to break it to you, babies are expensive. For the first three odd years you will be spending a lot on baby accessories including diapers, creams, toys and what not. After that, education expenses will start and travel will include additional cost too.
You have to think about this change that’s about to come in your financial life.
There will also be doctor visits for the baby and the mother in the first year and vaccination costs too.
You may not be able to estimate an exact cost for these increased expenses, but you should know that if you were barely able to make ends meet so far, you will have to cut back spending significantly to manage a new member’s presence from here on.
If you were prudent and saving all throughout, be prepared that some of that saving is going to go towards baby expenses in year one and two.
There are two ways to accommodate higher expenses, either cut back on other spends or increase your income; until the latter happens, it’s good to have savings to fall back on.
2. The cost of education
Education is not just the tuition fee you pay at school but also fees for the several extra-curricular classes you will end up enrolling your child for. There are art and craft lessons, football lessons, speech and drama lessons, even GK lessons which start from age 3 onwards. Parents get competitive about how much their 3-year-old child can achieve and the fear of being left behind will make you enroll your child for these structured programs at a young age. Not to forget trying to make them coders even before they reach a double-digit age. Costs can be as much as ₹500 a session and weekly expenses for these various lessons in a bid to make your child multi-talented, can reach up to ₹1500-2000.
Then there is the cost of uniforms, shoes, equipment, craft material, Lego sets and so on. Be ready for the change that modern education brings to your savings.
Lastly, start planning for the 12 years of high school and 3 + 2 years of higher education. Inflation or price rise in the education sector is higher than the general inflation in the economy. What this means is that you will find your tuition cost goes up every year. Newer curriculums have come into existence and many private school fees run into lakhs starting with nursery education itself. Brace yourselves, and start budgeting at least annually for these expenses. The positive is that the cost of schooling will be known in advance and you can prepare accordingly.
3. Change in income patterns
A baby needs a parent. One of you will have to either take a break from work for some time or you may find that the needs of your child are such that you need to cut back on work more permanently or even give up work completely. You may feel like you have it all planned out, but in truth you can never know how plans will shape up till they do; when the time comes to go back to work if your heart strings nudge you to stay back and take care of your baby, you will. The demands on your work life to manage a balanced home life are unknown when the baby is born, but they are most definitely going to show up soon.
If you think that giving up jobs is not a financial possibility that can be managed by either parent, then the alternative is also expensive. You will have to hire a full-time nanny; in big cities this is an additional cost upwards of ₹20,000 a month.
Whether you decide to forgo the income of one parent or hire a caregiver for your baby, the decision needs a well thought out discussion on how to manage the finances once the outcome is known.
The idea of writing this is not really to scare you financially about your decision to have a baby. Having a family to care for and love is a primal need for most of us.
The idea is to ensure that you are aware of the financial outcomes and build your ability accordingly to provide for your family’s needs at all times.