by Ah, the joys of having young kids. Sleep? Forget it. Dirty nappies? Get used to it. And as for having any money left over at the end of the month… well, hats off if you can manage it.
We remember having the same cane chairs for all of our kids’ first steps, which was just part of trying to support a family on a cadet journalist’s wage.
Of course, despite all of the sacrifices, kids still bring you more joy than you ever thought possible.
And trust us, after raising four of our own we can safely say you will get through it. So with the benefit of hindsight, we’d like to share five smart financial steps to take when you first have kids.
1. Budget for a more modest lifestyle
You probably don’t need to be told that your free and easy weekends are over for the time being, but that doesn’t mean you have to be home-bound all the time.
Spend some time making a budget that factors in your new family’s everyday expenses and household essentials, which will involve adjustments to your old lifestyle. This can be a bit of a shock, but will ensure you recognise any shortfalls before they become big problems.
Then see how you can arrange social and family engagements around a tighter budget, because mental health is just as important as financial health in a young family.
2. Review your insurances
While it may seem like an unnecessary expense, insurance protects you and your loved ones financially if something goes wrong.
So go through your insurance policies, including any held within your super, and ensure there is adequate life, income protection, trauma, health and home insurance to protect your family if anything happens.
As a general rule, you need enough insurance to support your dependents, cover debts and provide for ongoing care if you die or become incapacitated.
3. Get your estate in order
Updating your will is crucial when you become a parent, or if you don’t have one, then it’s the perfect time to tick it off your to do list.
One of the major decisions is naming a guardian for your child, but it also involves dictating where your assets will pass in the event of your death and naming an executor to administer the will.
While it’s possible to buy ‘do it yourself’ will kits, professional help will ensure that your will is legally binding and your wishes will be carried out as intended.
4. Build an emergency fund
Setting up your will and adequate insurances are both essential to guard against big, unexpected events. However, it’s also important to be prepared for the smaller financial headaches that life throws up too.
So start setting aside some money in an emergency fund. This is money that can be easily accessed in a financial emergency, like your car breaking down, an expected health bill or career change.
Ideally this will be six months’ worth of living expenses to cover your bases, but whatever you have now, the most important things is to start adding to it today.
5. Set up a savings account
Setting your kids up with the opportunities you want them to have starts the day they are born. And there’s no bigger help in funding their future education, sporting or social pursuits than compound interest.
So try to factor a small deposit into your family budget that goes into an account for your kids to access later.
Ticking this over will quickly add up. Say you start with $500 and add $20 a week, at an average interest rate of 4 per cent, it will grow to $28,300 by the time they turn 18.
If you’re starting a new family, spend some time making these financial changes to put your family in the best position for a bright future.