Becoming a parent is the most life-changing event that many will experience. When you are getting ready to embark on this exciting as well as a scary new adventure, being prepared is essential. Before the baby arrives and also in the weeks later, it is very helpful to be ready for the financial changes that are to come.
Becoming a new parent can be very overwhelming. From the moment the baby comes home, you have to be mindful of every action and be cautious about how it will affect the baby in terms of their health and upbringing.
In order to help new parents prepare to navigate through these changes, a checklist of financial to-dos has been formulated.
- Draft a monthly budget
Having a new member come into the family increases your monthly expenses, and if it is a baby, it will be twice the expenses. From medicines, diapers, food, to baby care products, to visiting a paediatrician, There will be a lot of expenses that you need to include in your monthly expenditure.
It is very easy to increase a budget by cutting down on your investments and savings, however, that is not the best way to do it. Reducing your investments and savings can hamper your financial future. Instead, you should check the budget you have been following and make the required changes. Moreover, to include the exact expenses for the baby, you might also need to cut down on a few personal expenses.
For instance, prior to the baby, if you would have dined out or ordered food twice a week, you can change it to a once a week ritual.
- Emergency funds
The one that is kept aside for emergencies is known as the emergency fund. It is a good practice to keep aside 6 months to one year worth of expenses as emergencies.
When the baby comes home, your expenses will also increase. Hence, automatically you should increase the amount of your emergency fund.
- Term life cover
Life Insurance is meant to take care of your family’s financial needs at the time when you are not there. Once the baby is born, you will have to include your child’s education, health, etc in your future financial goal. The term Life Insurance coverage amount you need would also increase in order to ensure the expenses are taken care of.
Once you have a baby, you need to make changes to your financial goals, keeping the baby in mind. Their education expenses, health expenses, etc are quite high. This is a goal that cannot wait, and hence, you have to ensure that you have the exact amount of money when needed. Investing in fixed deposits, equity mutual funds and other various financial instruments that give inflation-beating returns over a long period will be very beneficial.
- Child’s health policy
When your child is 90 days old, he or she is eligible for health insurance. Since you cannot buy a health insurance plan for the child, you need to include her name in your health policy.
However, if you do not have health insurance or either you or your spouse are covered under separate individual policies, you should purchase a floater health insurance policy that will cover the entire family including your child.