Budgeting for a baby is never an easy task. The excitement of becoming a parent and holding your incredibly cute child is one thing but babies are expensive! No matter how you plan, there always seems to be something you haven’t budgeted for. It’s not your fault, these things come up and you learn to deal with it, what matters most is that your baby is healthy.
Having a baby shouldn’t just be a money decision but you have to understand that having a child will greatly affect your finances which is why budgeting for a baby is a must. Buying cute outfits and tiny shoes may be a lot of fun but you need to prepare yourself financially before your little one arrives.
Find out your maternity/paternity benefits
Depending on your work benefits, you may be entitled to top-up when you’re off on paternity leave. Since every employer has different benefits, you need to read the fine print to find out exactly what you’re entitled to. Keep in mind that some employers may even allow you to keep paying into your pension plan and/or stock plan so you want to ask about that too.
Figure out your housing situation
Where you live is obviously an important decision, but if you’re not careful you could wreck your finances. If you’re coming from a one-room rental, you may want to get more space, but is it really necessary to immediately buy a detached house in the suburbs? Buying a home will likely be the most expensive decision of your life, don’t rush it.
Get life insurance
Since you’ll soon have a dependent, it’s vital that both parents have a life insurance policy in place. How much insurance you get is a personal preference but the general suggestion is to get enough to cover your funeral, mortgage, and expenses for your child until they’re an adult. Talk to a life insurance professional to figure out what your needs are.
Update your budget
Budgeting for a baby will require you to take at your current budget. Hopefully, the extra mouth to feed won’t affect your finances too much but you will now need to budget for new categories such as diapers and in the future daycare.
Save for major expenses
Did I mention babies are expensive? Having your first child will require you to purchase some big-ticket items. A crib, changing table, car seat, stroller, and toys could easily run you a few thousand dollars.
Watch your spending
Since you know you’re going to have additional expenses, you should try to cut back on your spending before the baby arrives just so you’re used to it. When the baby does arrive, you need to avoid spoiling your baby. It’s way too easy to spend like crazy on your new child.
Open up an RESP
If you’re going to spend money on your baby, opening a Registered Retirement Savings Plan is the best way to do it. As an added incentive, the government will match your contribution by 20% up to a maximum of $500 a year. So to get the full match you need to contribute a minimum of $2,500 a year.
Top up your emergency fund
Once your new baby arrives, your monthly expenses will increase hence why you want to top up your emergency fund. If you currently don’t have an emergency fund set up, it’s recommended that you put aside 3-6 months of expenses in case of an emergency such as a job loss or medical emergency.
Update your paperwork
Whenever you have a life event, you need to update all your paperwork. Your child will need to be added to your benefits, you’ll also need to include them as a beneficiary. You may also want to set up a will if you don’t have one already.
For some parents, budgeting for a baby means dedicating all their money to their child; this is a noble thing to do but a huge mistake nonetheless. Parents need to continue saving for their own goals such as retirement. You won’t be helping your child at all if you’re going to need them to help fund your retirement in the future.
Taking the steps to ensure your family finances are check is no easy task. You might have to make lifestyle changes such as cutting your expenses or finding ways to bring in additional income but it’ll be worth it.