Becoming parents for the first time is a big event. It’s life changing, it’s exhilarating and it’s also scary. There will be the usual worries about whether or not you will be good parents and if you’ll know how to care for your baby. But, you will also need to be prepared to support and nurture your child for the next 20 years not only emotionally and physically, but financially as well.
There are several important steps which you can take to plan and secure your family’s financial future.
Maternity and Paternity Benefits
This is something you should start doing once you begin planning for a baby. Look through the maternity and paternity benefits which your employer offers. If both parents are working, then assess which employer’s family package is more generous and plan to put your hospital and other claims against it. Understanding what medical costs are covered will also help you to decide which hospital and type of maternity package makes the most sense for you as well.
Take some time to figure out if you will be eligible for any tax breaks, subsidies and child incentives from the government and make sure you complete any paperwork that’s needed to qualify for it.
Write a Will
Protect the interests of your child by writing a will. You should clearly specify what sort of financial support and assets you plan to give to your child. It’s a good idea to name a trusted relative, friend or professional as a guardian for your child until your child attains his or her majority. In some countries, or situations, you may want to consider setting up a trust for your child. If you finances are more complex, speaking to a financial professional who specialises in estate planning can help to open up your options for you.
Add Baby to Your Healthcare Plan
If you have a company healthcare plan which covers your family, make sure that you add your baby to it. This will allow you to claim any medical expenses which you are eligible for.
Arrange for Medical Insurance
Arrange for as comprehensive a medical insurance plan as you can for your child within the first year of birth, or even at birth. At this point in time, most children will not have any identified diseases or health problems and it will be possible to get a medical insurance plan which will cover them for all significant diseases easily.
Plan for Child Care Costs
In Singapore, there are several child care options, and they all come at different prices. Sit down with your spouse and have a serious discussion about what your future child care needs will be. Will you be sending your baby to infant care from the age of 6 months on? Will you delay preschool until kindergarten? What type of preschool do you plan to send you children to? What about childcare arrangements at home? Will one spouse stay home to care for the kids? If not, will you need help from family or domestic help? How much will all this add to your monthly expenses?
Childcare is possibly the single largest expense that you will need to plan for in the first 6 years of your child’s life. It far outweighs anything you will spend on diapers, baby products and milk powder, so it is worth spending time to work out what your expenses are likely to be over those first 6 years.
Assess Your Long Term Housing Needs
Do you plan to have just 1 child or more? If you do, can you continue to live in your present home? If you think you may need a bigger home within the next 5 to 10 years, it’s a good idea to start planning for it. Perhaps you can move to a further location where rentals or the price of a home costs less? Perhaps your incomes will allow you to meet your needs if you save carefully? Assess your housing options early and plan for them. Goals like these take many years to achieve.
Start Saving for College
This might seem like it’s a long way away, but kids grow up fast and college costs can grow too! Think about how you can start saving for college. Don’t forget to factor in the expected rise in the cost of living and the impact it will have on the cost of college.
2 Income or 1?
If you’ve gone through the exercise of understanding your future housing, childcare and college costs for your kids, and if you add in your own retirement plans, you will have a fairly good idea of your major expenses and income needs for the next 20 years. At this point you need to have a real discussion around whether or not you need to have 2 incomes in the family or just 1. If you plan to have 1 spouse at home with the kids for several years, then you need to reassess your needs and expectations to take into account a future drop in income.
Create a Safety Fund
Life is uncertain and you need to have a contingency plan for those situations where you, your spouse, or both of you may be unable to work, or face an emergency and need additional funds. Typically, you should plan to have the equivalent of 6 to 9 months of your salary set aside in a safety fund which you can liquidate easily in case you need it.