Arrival of a child is definitely one of the happiest moments for a couple. The beginning of parenthood involves a lot of preparations and being financially ready is certainly one of the most important ones. Moreover, your newborn is bound to need a lot of care, which can be an expensive proposition. So to help you plan your finances better, we have prepared a guide that will lay out the must-do tasks that can help you manage your new parenthood easily.
- Employer’s maternity policy: Know the rules of your employer and the maternity policy stated under law to have an accurate picture of how the maternity leave will affect your bottom line. This is important so that if the new mom is no longer earning a regular income, it does not affect the family’s overall budget. Also, post delivery expenses might shoot up due to health complications and the maternity leave period may have to be extended. In preparation of such an eventuality, you should have your finances in place to manage the increased expenses in a reduced family income.
- Purchase a health and life insurance: If you do not wish to get caught up with a sick baby without any coverage, you must include your child in your existing health insurance policy as soon as possible or buy a separate one for you newborn. Also to protect your family from any sort of unforeseen calamities, purchase a life cover if you don’t already have one and enhance the existing one adequately for better coverage in case of your/your spouse’s untimely demise.
- Have an emergency fund in place: The increased day-to-day expenses along with higher than normal cash outgo can make your savings take a major hit when the infant arrives. Therefore you should have an emergency fund worth 4 to 6 months of living expenses which can come in handy in case of unexpected medical costs which are not covered under your current insurance plan.
- Start planning for future: The cost involved in raising a child is substantial and the sooner you start planning for it, the easier it is to manage. Plan for your child’s education and other future requirements by earmarking investments consider investing in an SIP earmarked to take care of your child’s future education expenses. Also, since these will be long term investments, you can opt for equities as your preferred option, which can potentially give you 15% annualised ROI on an average. Even a debt fund investment providing 8% annual ROI might work. Seek advice from a financial expert in order to choose the best investment strategy.
The following is an illustration of how you can save Rs. 30 lakhs for your child’s higher education 15 years down the line*.
|Target Corpus||Rs. 30 lakhs||Rs. 30 lakhs|
|Investment Period||15 years||15 years|
|SIP/Monthly Investment Required||Rs. 4,432 per month||Rs. 8,612 per month|
* The facts and figure mentioned above are illustrative and subject to periodic change.
Parenthood comes with a lengthy list of responsibilities, mastering all of it will obviously take time. Start preparing early, so that you are financially and mentally ready before your little one arrives. That way you can easily ensure a financial balance in life post your little one’s arrival.