Budgetting for a baby

In South Africa, the cost of having and raising one child can easily reach R1 681 470 for the average middle-income family. That’s more than R90 000 a year! While organising your home and your life for Baby, make sure you also organise your finances so that you can make the most of your time with your precious new arrival.

There is so much joy that comes with bringing a new life into the world and creating a family, but there are also significant life changes that accompany this exciting event. Besides the emotional, physical and mental factors of a new parent’s life, the financial realities of having a baby can also be life-changing. You want only the best for your children, and that is why it’s important to plan for your baby’s arrival and future.

Putting together a pre-baby budget

First things first – looking at a pre-baby budget. This includes putting together a realistic breakdown of all the costs you need to consider before the arrival of your newborn. The table below provides some helpful guidelines in terms of what it can cost* to prepare for your bundle of joy.

Cost-saving tips:

• A good idea is to create a gift registry so friends and family members who want to give gifts know exactly what you need.
• You can expect to change 2 500 dirty nappies in Baby’s first year, so you might want to consider using cloth nappies. They’re cost effective and much better for the environment. If you want to go the disposable nappy route though, the best way to save is to buy them in bulk at warehouse stores or look out for special offers online.

Plan for your maternity leave

It's important to tell your employer as soon as possible about your pregnancy and expected delivery date. You should also contact your HR department and find out exactly how maternity leave works in your company.

You are legally allowed to take four consecutive months of maternity leave, but your employer is not obligated to continue paying your salary during this time. You might have to take unpaid maternity leave, which means you may need to open a short-term savings account you can use when you’re not earning an income. According to experts at the Institute of Financial Planning, parents should aim to have at least three months’ income set aside for emergencies before their baby arrives.

The expensive reality of hospital costs

At a private hospital, a natural birth will cost you more than R9 000 for the first day, and an epidural will cost almost R2 000 extra. For caesarean-section moms, your first day will cost almost R13 000. If you’re planning to stay a little longer and need the nursery, the cost is just over R3 000 extra per day.

Even if you're on a medical aid, costs for pre-natal, maternity and post-natal care are factors that can heavily affect your pocket. This is why it's important to find out if your medical aid will cover these costs or if you will have to contribute to the costs. You may also want to find out from your chosen practitioner if they belong to your medical aid’s payment network. If not, you could consider going to a specialist that belongs to your network as this could reduce your costs quite substantially.

Stay at home or pay for childcare?

It's important to decide early on whether you will be a dual-income household, or if you  or your partner will be a stay-at-home parent.

If you choose to be a stay-at-home parent, you have the chance to share your child’s developmental accomplishments, along with the security of knowing you’re in charge of their care. However, it does come with financial sacrifices because you will be living off one income rather than two. If this is your goal, then it is important to plan carefully to make sure you have enough savings to carry you through this time.

You may be one of many who can’t afford to live on a single income or simply don’t want to stop working or give up your career. There are many options for quality childcare available, such as a crèche, live-in or live-out nanny or an au pair. You can expect to pay between R150 and R450 per day, depending on which option you choose and what works best for your family.

Looking ahead - savvy planning for your baby's future

Once you're settled in with your little one, there are key financial aspects you should consider to prepare for your child's future.

• Draw up a will: As a parent, it's more important than ever to draw up a will to protect your family. You may want to appoint a lawyer to draft a will in which you name an executor (someone to carry out your will’s instructions) and designate a guardian for your child.
• Save for their education: With tuition fees skyrocketing above inflation, the time to start saving for your child’s education is now. For a structured investment option with limited access, you may want to consider investing in an endowment. Alternatively, you could invest directly in a portfolio of unit trusts. This is a flexible investment option providing easy access to your money. The best way to understand which options suit your needs is to meet with an accredited financial adviser who can recommend products appropriate for your circumstances.
• Buy life insurance: Having a child who depends on you for support means it’s important to have the right type and amount of life insurance in place to provide a financial lifeline if something were to happen to you or your husband or partner.
• Lead by example: Your children will learn their most valuable lessons about money from you. According to recent research, parents can start talking to children about money from as young as three. If you make a conscious effort to teach your children about money, they are much more likely to have a healthy relationship with it.

Speak to your financial adviser about investment options and how you can restructure your financial portfolio to provide for your expanding family.