Different life stages require you to tweak your financial plan to meet the new goals and needs. When you get married, your expenses increase as you set up a new household. Similarly, when you plan to have a child, you would need to put in place certain financial protections and safety nets to ensure a smooth future for your family. The birth of a baby could increase your expenses manifold and you may find yourself in trouble if you don’t plan properly.
Here’s how you could plan for the arrival of the bundle of joy in your life:
Having a baby requires a lot of financial financial discipline. Before the delivery, there will be costs related to the pregnancy for regular check-ups, medicines and medical tests. Then, the actual delivery and hospital expenses are to be taken care of.
These days maternity expenses, much like hospital and medical bills, are going through the roof. While a simple delivery could cost up to Rs 50,000-70,000, the bills could go up to Rs 2-3 lakh in a private specialty hospital, according to industry estimates.
In case of a caesarean delivery, the cost could increase by as much as Rs 4-5 lakh. “One needs to plan for the expenses of a baby before childbirth to avoid financial turmoil. The first step one can take is to buy a maternity insurance policy for meeting maternity expenses. While taking health insurance (including the couple), one should check whether the policy covers the maternity expenses and the waiting period of the coverage, if any,” says Hemant Beniwal, certified financial planner and director at Ark Primary Advisors, a financial planning firm.
Also, you could take maternity cover as an add-on to an existing insurance policy by paying a higher premium. You could take a standalone maternity insurance as well.
However, it won’t make sense to just depend on health insurance. The couple should start building their own savings parallelly.
Once the baby is home, there will be recurring cost heads to deal with like doctors’ consultation, vaccinations, medicines, clothes and other accessories. You could take the help of online tools to calculate the cost for a year and check with young parents to get an idea how much you should keep aside and how your budget will change in the first year.
Also, assess if both partners will continue working after the birth of the baby. If one plans to stop working, you should provide for the income gap by putting in place an emergency fund. Do remember to factor in inflation while doing so.
“One should start maintaining an emergency fund for meeting the expenses during uncertain times or a year of no earnings. The amount saved in such a fund could be used to meet the maternity day-care expenses, in case one parent or both need to stop working for child care,” says Beniwal.
While inflation is a reality no one can escape, remember that education inflation is much higher. One way to fight this is to benefit from the power of compounding but that will come into play only if you have a long term. The earlier you start saving and investing for the child’s future, the better will be the prospects to reach the goal of providing for their education.
“Definitely, we don’t know what the child will pursue in the future, but we need to set aside a certain amount of corpus which can be used when the goal is due so that one’s financial life will not be hampered. Right now, you have to visualize what kind of education you want to provide—the numbers will be totally different if you are talking about engineering in India versus sending kids to the US,” adds Beniwal.
Make a realistic assessment of what you can provide for and start saving accordingly. Remember that you could also keep increasing the saving amount as your salary increases and you are able to dream of providing a larger corpus for your child’s education.
A child brings a lot of happiness to a couple’s life. But along with that, it also brings a lot of responsibilities. Hence, it’s important to be prepared and plan properly beforehand.
