Firstly, bringing your bundle of joy into this world entails set-up costs (crib, strollers, car seat, etc), medical and hospital bills. At the second level, once you have the baby, it brings with it day to day management costs (diapers, wipes, clothes, formula, etc.), not including all the books and toys you want to splurge on for your child.
In some cultures, it may also mean having a big celebration and distributing gifts to family members. If both parents are working, planning for childcare services (daycare or nanny) needs to be accounted for. Alternatively, it is likely that one parent might choose to stay at home to provide care for the child. Either way, budgeting and having a realistic plan helps manage expectations and manage financial stress. While these are the more immediate costs one needs to look at, the big white elephant in the room is college education, which most parents also start planning for early on, given the rising cost of education.
With the help of our friends who have kids, we got a fairly realistic idea of expenses we needed to account forone-time set-up cost as well as ongoing expenses. We also identified the cost of childcare service. Plugging in the numbers into an Excel sheet gave us a good idea of the additional monthly expenses and helped us plan smarter. We also spent some time with our financial advisor to manage our assets and plan for our childs future.
Dos and Donts
While all expecting parents must ascertain what works for them, it was important for my husband and me to work together on our finances, budget and have a plan.
We are not the go-with-the-flow types and I would strongly discourage that approach as first-time parents.
Having done the homework on our finances, it helped us plan better, lead a (fairly) stress-free life and enjoy our baby especially when I made the decision to quit work and stay at home to provide for my family.
Setting up a college fund or some type of savings for the childs education is a must. We continue to identify (and re-evaluate) the non-negotiables and negotiables with respect to raising our child and that helps my husband and me to be on the same page. With that said, it is of utmost importance for the spouses to have an open and continuous dialogue on financesit is a significant ingredient for a healthy marriage.
Dont be bogged down
I spent most of my pregnancy in happy anticipation of motherhood. It was only after the sixth month that I really started any kind of planning. I dont know how a lot of mothers prepare, but I didnt plan too ahead. Babies come with a fair amount of expense, but I didnt really think or list out the expenses during the first two months, after my son was born. I was working on an auto-pilot (mostly because I was short on sleep). Since I was at my mothers place, I only got an actual idea of the volume of expenses, once I moved back home.
I soon realised, that apart from budgeting for diapers and formula, another important expense is vaccines. Somehow, when we plan our finances post pregnancy, we always tend to overlook thisexpense, and there are a fair amount of vaccines for the baby, especially in the first year.We have been fortunate enough to not have to stress about the money spent on vaccines, or evendiaper and baby food. Our monthly expenses had increased by more than 50 per cent, though it was stillmanageable. My husband, and I would frequently wonder as to how people cope with the expense of 2children.
Penny Wise, Pound Wiser
In my head, I compartmentalized the expenses into essentials and non-essentials. The essentials wereexpenses that I refused to cut corners onthese included medication, vaccines, food and diapers (for the first few months). Non essentials were clothes, toys, furniture and accessories. Diapers joined this list after a few months. Non essentials were also required, but we budgeted these and as frequently aspossible, went for a less-expensive alternative.In infancy, babies outgrow clothes really quickly, so my first option was always hand-me-downs fromcousins and friends. Then there are always the various onesies, blankets, baby care products and toysthat you receive as gifts. I did our best to utilize these efficiently. We went to discount stores if we needed to buy clothes or toys.We also bought diapers and wipes in bulk. It wasnt the most organized effort but it kept our baby expenses in perspective. In hindsight, I know that if I written down the expenses, I could have planned and perhaps cut back on the expenses a little more.
Dont put all your eggs in one basket
It is very very important to do financial planning right from the beginning, especially when the family expands. From my grandmother, who was a very savvy investor even in the 70s, I understood the need to invest, learnt to play safe, not to run behind short-term gains and to strictly adhere to the policy of not putting all eggs in one basket. Some bitter personal financial losses taught me to take charge of my own finances and growing up, the humble piggy bank turned out be a good teacher too. While I didnt start financial planning for Saesha before her birth, I did so as soon as she was born. I first bought gold; I try to buy 10gm atleast once a year; by the time shes 20-25 years old, shell have a good chunk. Then I took a bouquet of policies from LIC that will mature when shes 18 that may help finance at least part of her higher education. I opened a minors bank account for Saesha and put in it all the money that comes her way, plus some small deposits. And whats equally important, I bought a term insurance for my husband and me.
Keep track of stocks and investments
Its important to remember that you must insure yourself and in my opinion term insurance is the best. Next, I upped my medical cover, started some fixed deposits, invested in a few monthly mutual funds SIPsright from classic equity to balanced, to arbitrage, etc. What you have to bear in mind when investing is not only your childs future, but also your own retirement after bearing all the financial burden of the child, right from dolly to doli! So plan in a way that you too have a comfortable chunk to retire on. For the long run, I have made certain real estate investments of small nature. I didnt approach any financial planner for all this, but watched various business channels, which helped a lot. I also have some knowledge because I have been tracking the stock market regularly and doing an technical analysis of stocks, futures and options.
The earlier you start, the better
Financial planning is very important, but I didnt start working towards it till I was pregnant with my daughter Ira in 2013. But soon after that I started saving for her, I set aside Rs. 5000 every month in a separate bank account. Im not consciously cutting down on anything, but now I just save first and then spend on us from whatever is remaining. I plan to invest in some policies, a recurring deposit accountfor liquidity to use the money when shes in school. Soon, I will also speak to my financial consultant for some long term savings that she can use post college, for her marriage, or whatever else she may need the money for.
My parents managed without this kind of planning, sometimes taking a little help from my grandparent. Though it is not impossible to manage without planning even today, it completely depends on your earnings. For middle class and even upper middle class families, it would be difficult. The earlier you start, the better it is as planning your finances just helps you manage your money well.