5 Money tips for expectant parents

 Welcoming a child in the family is one of the most anticipated events in a couple’s life. However, if you haven’t planned for it well, it could be financially debilitating. Here are the things you should take care of before the baby arrives, says Namrata Dadwal. 

 1 Don’t buy everything  

Most parents start splurging on cute baby stuff the moment they receive the good news. But, remember, your baby isn’t going to notice, let alone remember, the expensive toys, clothes or nursery accessories. So, avoid spending money on things that she’s going to outgrow within a few weeks. Preferably, rent most of the stuff, buy pre-owned items online or use hand-me-downs, especially items like baby swings or cribs. For the latter, check sites like olx.in, rentoys.in, toys-on-rent.com and toyzland.in. It’s a good idea for parents to focus on essentials as the baby is likely to receive a lot of gifts. You don’t want to end up with double of everything, do you? Instead, spend on baby-proofing your house. Once the child arrives, you will hardly have time for repair work for at least two years. So, install smoke alarms and socket protectors, smoothen and varnish splintered wooden furniture, and install shelves so you can keep stuff above the toddler’s reach.  

2 Get your finances in order 

 
Your budget will go up substantially once the baby arrives, so it’s best to get rid of high-interest debts or at least pay off as much as you can. You’ll need to bolster your contingency fund, too, since your monthly expenses will be on the rise. Keep at least six months’ worth of expenses in the fund. Also, discuss with your spouse whether both of you will continue working or move from a DINK to a SISK (single income, single kid) family. If both of you plan to work, calculate how much you are likely to spend on hiring a full-time maid/nanny. However, if one of you is thinking of quitting, try living on the income of only one person for 3-4 months to see if you can afford to do so. In this case, take care of financial paperwork too. If you want to leave the job for an indefinite period, you may want to consider withdrawing money from the EPF and investing it in another avenue since the former won’t earn you any interest if there is no contribution in it for three years. 

 
3 Write a will 

 
Don’t be lax here. Write/modify your will immediately to ensure that your child has no problems claiming your assets as a legal heir. You could even appoint her as a nominee for some of your investments or accounts. More importantly, appoint a guardian for your child after taking that person’s approval. Specify the manner in which you would want your child to be brought up and the assets to be used for rearing her, if anything were to happen to you and your spouse. This will avoid any confusion or acrimony among family members about who will be responsible for what. 

 
4 Increase your insurance 

 
Review all your insurance policies. Take a term plan or enhance the existing one after taking into account all your outstanding debts and the amount you will require to sustain and educate your child for the next 20 years. Reassess your health plan too. The cost of prenatal and postnatal care, as well as regular paediatrician consultation fee, can be exorbitantly high. Even if your employer provides a cover, buy a family floater plan that includes your child. A cover of 3 lakh for a 30-year-old with a family of three will have an annual premium of 6,500-7,500. However, all such plans cover the child only after he is over three months old. Some plans provide maternity benefits too, but you should have had the policy for at least two years to avail of this benefit. 

 
5 Start saving for other goals 

 
Bringing up and educating a child can be very expensive. In fact, you will spend 50-60 lakh on your child till he turns 21. At least half of this amount will be spent on education. So, start saving early for this goal. A good way to begin is to invest the cash gifts that your baby receives and start a monthly SIP. If you begin investing even 2,000 a month after the baby is born, you will have a corpus of about 12 lakh by the time he is an adult (assuming 10% return). However, don’t pare down on investing for your own goals, specifically retirement. You can get a loan for your child’s education, but you won’t get one to sustain you during the sunset years. 

 Source : ET Wealth - 21-Jan-2013