“We just can’t afford to have a baby”.
It’s an increasingly common, and one of the saddest, comments we’re hearing from friends of our adult children and nieces and nephews. Young Aussie couples excluded from the joys of raising a family purely because of cost.
But it doesn’t have to be that way. Careful planning and a rearrangement of priorities can achieve the best of both worlds.
We were a bit old fashioned, and naive, when we decided to have our four kids. We didn’t really think about the costs. We just did it and adjusted our life to manage. But times have changed. Young Australians now have different priorities, lifestyle expectations and career paths to consider.
One part of us thinks it’s a shame to be so clinical about it, while another part of us admires the focus and analysis.
THE FINANCIAL PAIN
This is the bit which spooks everyone. The sticker shock can be a bit scary;
. Out of pocket expenses for a private health pregnancy and birth are between $2,500 – $8,500.
. Research has calculated raising two children to adulthood will cost $500,000 to $1 million depending on your income, housing and cost of lifestyle.
Yes, it’s a lot of money but the average full time wage is $75,000 (per person and before tax) and the wealth of Australian’s has never been higher. The problem is that our houses and superannuation have gone up in value while wages haven’t risen nearly as much. So we’re asset rich and cash poor.
THE FINANCIAL PLAN
Before you and your partner even tackle the question, get a rough sense of your costs, which may not fall neatly in line with the national average. You don’t need to calculate the next 18 years of expenses, but you can at least focus on the short term.
Baby Center has a great online tool to help you get started, and you can modify it for your own particular situation. Yes it’s American but is a nifty calculator. It factors in prices for one-time buys like a crib as well as recurring expenses like “diapers” (nappies). Use it to get a rough budget estimate. ASIC’s Money Smart website also has a budget calculator with a good cost of children section.
If you have friends who’ve recently started a family, ask them about the costs they’ve incurred, especially any surprises. Remember that while a baby adds some major new expenses, it also cuts spending in other areas, like entertainment and dining out. Also, learn what maternity and paternity benefits your employer offers because that will affect the extent to which your income could take a hit.
THE TALK
Share any financial anxieties about starting a family and ask whether your partner shares them, or has different ones. For many couples, the greatest anxiety comes from not understanding their current habits, so track your spending and understand what you could give up.
Here are a few questions to kickstart the conversation:
. “Is there anything we want to do before we have a child?”
You may be able to reduce some shared anxiety by framing the conversation as when, not if. Do you have any other goals (traveling, going back to study, paying off credit card debt ) that you want to achieve before a child’s arrival? Separately, list three to five things you want to accomplish that could derail your family plans. Then talk through them together to prioritise and use those lists to create a timeline.
But, if having a child is a priority, don’t set up so many roadblocks that you delay it indefinitely.
. “I think I would want to take at least a few months off work when we have a baby — if not a couple of years. What do you think?”
This hits a couple of key issues. Not only the desire to spend more time with a new baby, but also changes to family income and the cost of care. Often, spouses start out with different assumptions. So share your own childhood experience, outline what you would ideally like to do — and then ask the same of your partner.
If one parent stays at home, at least for a while, you’ll need to discuss both the short-term hit to your income and any longer-term effect on career goals. If both parents continue to work, you need to think about both logistics and cost of childcare, which can be huge even after the Government rebate.
. “Do we really need all this baby stuff?”
Once you start looking at costly baby supplies, it’s easy to feel overwhelmed. Plenty of retailers are happy to make you think that you need the latest of everything to be successful parents. But you don’t. Focus only on the necessary — a car seat, clothes, feeding equipment, and crib.
Your baby will never know that your stroller or crib is second-hand or you bought all the toys from Gumtree.