How to Be Financially Prepared for Parenthood
Like your parents would say, and like every online website would quote, “parenthood is a continuous learning experience.” You learn something new about your child every day. And no matter how adorable they are, it is better to be financially prepared for them.
Taking care of your kids can be an expensive task. Research shows that on an average, a family spends over £14,0000 raising a child. To make the finances simpler for you while preparing for parenthood, here are some guidelines.
Know your health insurance policy
Even after having a health insurance, there are chances that you will be held liable for some extra expenses, when you are about to become a parent. These extra expenses include the trips that you make to the hospital for regular check-ups, and range from £400 to £2500. This includes the deductible and co-pay.
Therefore, it is advisable for the mothers-to-be to have utmost knowledge about their health insurance policies. This will provide them with a much clearer idea about how much they will owe when everything else is said and done.
There are various expenses that you are going to make on your journey of becoming a parent. Thus, if you plan for your finances ahead of time, it might help you in managing and being financially secured when the actual phase arrives.
It is necessary that you select the correct health insurance plan, keeping your deductible in mind and the expenses that you are going to make during the regular check-up trips to the hospital. You can find various plans online, and compare them to find the most suitable plan for you.
There are various companies that have employer-sponsored health plans, made available, that serve the same purpose as your health insurance plan. Once you select the plan you are going to buy, make sure that you completely understand it. Keep a habit of reading the policy’s explanation of benefits to prepare for the medical costs of pregnancy and childbirth.
Getting a life insurance
When you think about starting a family, it is necessary that you sign up for a life insurance. There can be instances that you have already taken one, long before you thought about starting a family. The most advisable thing is that you apply for it, before you are pregnant or after you deliver a baby.
People can choose either, a term life insurance or a permanent life insurance. When you take a term life insurance policy, you are paid a lump sum amount in worst case scenarios. Whereas, when you purchase a permanent life insurance, you are paid whatever is your contribution to the policy.
For making the process of deciding easy, experts propose to go with a 20-year term insurance policy. You can always switch later, when you have enough time to finalise your decision.
Sign up for Short-term Disability Insurance
In some states, it is essential for an employer to proposition a short-term disability insurance to cover the cost of maternity leave. So, if your company does not offer one, you can always sign up for one on your own.
The short-term disability insurance suggests that, you can be provided with a share of your salary amount. This is in case, if you are not able to work because of any medical conditions, one of the obvious reasons being pregnancy.
In private disability insurance, half or the complete amount of your salary is paid to you. Make sure that while you are choosing your own policy, it covers pregnancy as well.
Plan for Bigger Monthly Budget
When you have a child, there are various little expenses that keep adding on a daily basis. It can be preparing a nursery, adding food costs if the mother is nursing, extra heating needs, paediatrician visits, and so on.
And every time a new addition is made to the list, the budget keeps growing. One way to manage these growing needs is by readjusting your monthly expenses, so that you can incorporate the extra expenses that might get added.
While preparing for parenthood, make sure you are ready for the following financial changes. The following list gives you a brief of the list and their monthly expenses:
- Diapers: £50
- Wipes: £15
- Baby Formula and food: £90
- Child care: £400 – £2000
- Doctor’s visits: £50 – £100
- Books and toys: £15 – £50
The other products that could add up are, baby clothes, shampoo, and other hygiene essentials. If you are preparing to contribute in a children education fund, you might as well count that in the expenses as well.
Create a Baby Fund
It is important that you start saving in your baby fund once you discover that you are expecting. These include all the one-time expenses, which includes the enormous hospital bills.
On the other hand, if you plan to have a baby in the coming few years, you can always start saving for it now. Moreover, you can even save up for the following things:
- Maternity clothes
- Nursing tops
- Car seats
- Diaper bags
- Cribs and other baby furniture
- Baby monitor
- Breast pumps and milk bags
- Safety gates
- Bottles and bottle brushes
- The cost of decorating your nursery
Basically, come up with an estimated total of how much amount you need to have in the baby fund when the baby is born.
Reconsider your Debt
Unexpectedly, when you start focusing on saving for the baby, you should focus less on the debt. Keep making minimum payments on your debt and continue saving the extra amount on the possible emergencies that may occur during the pregnancy, and after the birth of the child.
Once the baby is born and the mother is declared fit, consider paying off the remaining debt amount and move on with your financial plan.
Consider the changes in your Income
While you apply for a short-term disability insurance, you must consider the amount that you take home, especially once the baby is born. You need to be financially prepared once the baby comes. This includes your decision of continuing to work or staying at home full time.
If you decide to continue working after the baby is born, you will need to pay for the childcare or look out for other options.
To have some extra amount handy, you can always look for some extra income sources. One way you can gain some extra cash is by claiming for a compensation on the PPI policy. Payment Protection Insurance (PPI), has been widely mis-sold in the UK.
If you discover that you are one of the victims and were mis-sold the PPI policy, you can move on and make a claim. There are two ways to make a claim,
- You can take help from the claim management companies.
- You can make a claim all by yourself.
Once the claim is successful and you acquire the compensation amount, you can think about saving the amount for the future of your child.
If the house runs on the income of only one parent, then you need to spend the amount wisely. When it comes to baby expenses, avoid spending cash on unnecessary things that you will not be needing at all. This is a must, especially when you are on a tight budget.
These tips will help you Financially Prepared for Parenthood and makes your life easier.