Starting a family is an exciting step, but it brings with it some new financial responsibilities. From planning for everyday costs to preparing for future milestones, getting your finances organised early can make all the difference.
This guide provides key strategies to help you manage your money as you transition into family life.
Expand Your Budget To Cover Family Expenses
As you take your first steps towards family life, it’s important to ensure that you have a good grip on your finances as early as possible. You’ll naturally have to spend more with a new addition to the family, and these costs can add up.
From baby supplies to infant food, your monthly expenses will inevitably increase in price as you start your family. With that in mind, you must expand your allocation to these spending categories (on top of your current ones like food, utility, and personal hobbies) to cover these additional costs.
If you haven’t started tracking your expenses yet, consider forming that habit as soon as possible. Budgeting helps you track your income and expenses, allowing you to plan your finances better and create a more controlled financial future—which is crucial when people depend on your income.
Start the process by using templates on spreadsheet software like Microsoft Excel and categorising your expenses from there. Alternatively, you can also download budgeting apps for additional convenience and an easier time accessing and updating your budget on the go.
Generally, a good way to save on costs through budgeting is by allocating a percentage of your income to certain expenses. For instance, rent can cover 30% of your income, food can cover another 30%, and so on. If you’ve exceeded these figures, then you can make an informed decision on how to cut down on spending.
By preparing yourself financially, you can reduce financial stress and have a more predictable and safe future for your family. So don’t skip out on it!
Familiarise Yourself With Your Entitlements
Whether you have a child on the way or are already a young parent yourself, there are a couple of Australian financial support schemes that can help support your parenthood journey.
For instance, dads can get parental leave pay that allows them to claim up to 20 weeks of government-funded pay to care for their newborn or newly adopted child. This may be applicable regardless of the order of the child’s birth.
Childcare subsidies are also handed out to approved households. Parents who fall below a monthly income threshold, are single parents or have a specific number of children under their care may be eligible for this additional financial support.
Your company may also provide parental leave schemes to make it easier for these parents to navigate the complexities of parenting a newly-born child. Be sure to contact your HR department beforehand to let them make any company arrangements in advance.
A newborn supplement lump sum payment may also be handed out by the Australian Government to support the care of a baby or adopted child. That said, it’s important to recognise that having both this scheme and a Parental Leave Pay active is not permissible.
In some cases, there are state-exclusive perks that parents can apply for from their local council as well. Be sure to take advantage of these benefits to ensure that you’ll remain financially stable and be able to provide the best care for your newborn child in their earliest days in the world.
If you’re not yet an officially recognised Australian citizen, you need to undergo the appropriate processing procedure to access these benefits. See this checklist to know what you must do to start a family in Australia legally.
Build a Savings Buffer for Emergencies
Another essential way to manage your finances effectively is by building a savings buffer or an emergency fund. This fund should be separate from the savings account that you use to pay for one-time purchases and monthly bills.
Instead, this buffer should be used during more challenging times, like when you’re experiencing a job loss, a sudden hospitalisation, or a home renovation project.
Typically, a good amount to aim for in this savings buffer is three to six times worth their living expenses. You can call your bank’s hotline and ask them to set up your bank account to automatically transfer a portion of your job earnings to this emergency account to streamline the process. Ideally, the bank account you pick should have a solid reputation and a high interest yield.
With a savings buffer, you’ll have peace of mind knowing that sudden issues won’t automatically put you and your family in a rough spot. With life having no shortage of unexplained surprises, having a little bit of money to serve as leeway can go a long way to sustaining your family without racking up debt.
Save For Family Milestones
From a new house to your child’s tuition, there are several milestones that you can predict and prepare for early on. The costs of these milestones should be taken into account when handling your family finances, as they’re crucial for your family to get where you want them to be later in life.
Create a timed savings goal to help you set your savings goals into motion. Reverse engineer it and get a figure of how much you should save each month to achieve that goal. If you find that your current earnings aren’t enough to reach that goal at that time, then either reevaluate the goal or find new ways to increase your savings.
It’s crucial to be consistent when saving for family milestones. It’s also equally important to keep updated with the conditions of the milestones that may change due to inflation and shifting needs for you and your children. You can alleviate this by putting money into a high-yield savings account or a time deposit that’s only meant to be taken out once the milestone approaches.
When raising a child, you’ll be able to generally predict their path towards adulthood and associate it with certain costs. Be sure to take their life and educational needs into account above all else, then follow that up with other family milestones that you and your spouse may have.
Prepare For Contingencies
While this may seem difficult to ponder, it’s a responsible thing to consider. You need to ensure that you’ll be able to care for your family’s needs when you’re no longer around.
Life insurance plays a crucial role in that regard, helping provide a financial safety net for your loved ones in the event that you or your partner pass on. This can help your kids and spouse achieve a steady financial baseline depending on the coverage you opted to pay for.
Be sure to explore different policies and pick the one that fits your needs best. You can consider getting multiple ones for extra measure, but be sure to balance that with your ability to spend for it as well. You should also consider getting additional insurance plans for other aspects of your life, like your home, your work, and your car.
Besides that, you should also prepare to handle estate planning for your next of kin. This specifies how you will manage and distribute your assets once you’ve passed. This step helps you reduce family arguments and stress, minimise legal challenges, and ensure that there’s a clear guideline on how to distribute things under your name.
In both cases, it’s a good idea to consult with a lawyer to help you structure your plan. This way, you can protect the next generation and not make things difficult for them in the future.
Good luck managing your finances!
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