Financial Planning for new families

If you are expecting a new addition to your family then congratulations. You will be blessed with a lifetime of experience and memories that you can look back on and hopefully be happy with. However, do not forget that with a dependent to take care of, there are now many more things to consider and all of these will affect your existing finances. Now will be a good time to review and plan your finances so that you will be in a position to meet your financial goals in the future

It really is not cheap to bring up a baby. The expenditure at the start needs to cover setting up the nursery at home, then buying all the things you need such as stroller, clothes, sterilizer, several sets of clothing. Not forgetting that there is the cost of domestic help that you will need while you focus on the daily routine of feeding and changing diapers every few hours. These are just the early years of having a baby.

As the child grows up you have all of the childcare costs for example kindergarten and if you live in some Asian countries then enrichment classes such as music and dance or ballet and art are the norm. This cost of all of this will mount up and it is important to think of what is really necessary and set aside a budget for that rather than try to keep up appearances and send your kid for every single class you can think of just because your friends are doing exactly that.

Budgeting for the family has never been more important as the expenses never get smaller. They grow as the family’s needs grow. This is to be expected as the grocery bills will increase as children grow bigger and eat more. Also as they children get older the experience of eating out becomes more expensive because you go to different restaurants for the variety as you want to give as much exposure as you can to your children.

Now can you imagine the second or third child coming along? The second one may not exactly double the cost for you as there could be an opportunity to re-use many of the items you bought for the first child. Better still if you have two boys or two girls then they can use hand me downs but if you happen to have a boy and a girl, the hand me down approach won’t be as easy.

Having one child is already expensive. In fact there are studies that show that it can easily cost around USD 200,000 to raise a child up to the age of 18. So, what are the things that as a parent you need to pay for?

Just a few examples of big ticket expenses:

1. Private education – In some countries the education is free but free is not always good. You may want to ensure that your children have the best start in life and are equipped with not just a well rounded education but also with friendships that can become important contact for the rest of your life. To get such quality relationships you need to be surrounded by the right  Ultimately you get what you pay for
2. Extra curricular activities – Not everyone wants or even has the ability to excel in their academic activities so what do you do if you are just a mediocre student? Can you make up for it in other areas? Sure you can. Everyone is good at something so you just need to find that thing that you are good at. It could be sport like Golf and you can be the next Tiger Woods or it could be Music and you could be a RockStar in the making. The point is that developing these skills is also not cheap and requires a great deal of investment in both money and time. Often these are expenses that start from a childs early years and if there are signs that there is a strong talent in the chosen field, a parents natural tendency would be to channel resources to develop that area.
3. College expenses – Depending on where you live this cost can vary quite considerably. If there are options to send the children to college or university in your own country then this may well be the most cost effective way. However if you have the means to send your child to study in United States, or Europe or Australia, then be prepared to come up with a large sum of money. The overseas education may be a good investment in your childs future provided they do well and make the best use of their opportunity to study overseas.

So we have list some of the larger items that a parent may need to pay for. So now what do you do? Start planning!

Consider taking a savings plan that can grow into the fund that you need by the time you need it. It is easy to do this provided you start you planning early and diligently invest in the fund or put aside that sum on a regular basis. If you want to meet those targets then the important things is to identify the goals early and start working towards them. This is a long term investment so a little put aside each month can grow to the desired sum over the 18 or so years. Even if your child does not use this for education it can be used for something else like starting a business or even a down payment on a house.

Please note that an expert opinion or professional financial advice should be taken as each persons circumstances are different and everyone has different needs and wants. My views are based on my own opinions and experiences and also from what I observe from my own circle of friends and contacts. Every country and every person has its own unique set of rules and the independent financial advisor can play an important role.