Five financial considerations for new parents
If you are expecting a new arrival or have recently welcomed a cute new face to the family fold, you should carefully consider the state of your finances.
Recent research has found that the average cost of raising a child to the age of 21 has risen by €5,000 to €261,000. With a child representing such a huge financial commitment, it is essential to prepare financially for the baby’s arrival. At such a busy time it can be difficult to dedicate much time to your finances, so, to give you a helping hand, here is our list of five financial considerations for new parents.
Many financial experts encourage expectant parents, particularly mothers, to buy life insurance at the earliest opportunity. Women should consider buying a life insurance policy during the pregnancy or even before they become pregnant. In the unfortunate instance that complications arise during the pregnancy, it may become more complicated and expensive to buy life insurance in the future. A ‘term’ policy is recommended over and above ‘whole life’ cover, as it is cheaper and pays out the face value of the policy, as opposed to whole life insurance, which is both an investment product and a life insurance policy.
Pay off major debts
If you are in a position to start life as a young family with as few debts as possible, that is an enviable position to be in. Once a baby arrives your expenses will skyrocket, making it more difficult to maintain debt repayments. It is generally not feasible to pay off every penny of debt before the baby arrives, as longstanding debts such as mortgages will likely exist. However, clearing as much debt as possible will certainly make things a lot easier.
This is something you need to think about before the baby arrives. Who will stay at home with the child in the short term? Will you be able to survive financially with just one income? Or will you both go straight back to work after your period of maternity and paternity leave has ceased? One thing is for sure, professional childcare is not cheap. If you have family members who are happy to look after the child while you are at work, this is certainly something you should make the most of.
Increase your income
If you’ve crunched the figures and have come to the realisation that you’re likely to struggle with the costs of raising a child, you should look for possible methods of increasing your income. Are you likely to get a promotion in the near future? If not, perhaps you should start looking for a better paid job? Is there any work you could do on the side? Once a child arrives you will find life stressful enough without having to worry about the state of your finances.
Income protection insurance
Children don’t become any cheaper as they get older; quite the opposite in fact. The cost of full time education is a major financial consideration. If you are unable to work for an extended period of time due to an accident or serious ill-health, have you considered how you will meet the costs of full time education? Income protection insurance provides a fixed, regular income if you are unable to work, helping you to maintain your financial commitments.