A few years ago, my wife and I welcomed a baby boy into our family. With the benefit of hindsight and a little more sleep, here are my top finance tips to help you manage your finances during this rollercoaster ride!
1. Public or private hospital?
Having had most friends and colleagues go through the private system, they were pretty surprised when we enrolled in the Community Midwifery Program (CMP) through our local public hospital, King Edward Memorial Hospital. I felt the level of care from Doctors and Midwives is equal or even somewhat unique in some ways. The most significant differences we found that made a difference were fewer scans leading up to the birth, being mum and bub being discharged the day after the birth and not having the luxury of controlling some aspects of the birth, such as your choice of an obstetrician. Trade this off with savings that amounted to at least $5,000. Next time around? As we would no longer be able to access the CMP, a few extra days of rest in hospital (or even a hotel room) would be well worth the additional cost.
2. Update your documents!
Prepare for a new baby by updating your estate documents and your personal insurances before your bundle of joy arrives. Don’t forget to include in your Will your preference of who should look after your little one on the death of you and your partner and prepare enduring powers of attorney and guardianship documents. And if you don’t know know what a testamentary trust is, now is the time to do some homework.
3. Remember private health insurance
Update your private health insurance policy just after the birth to avoid incurring the Medicare Levy Surcharge. You will also avoid waiting periods if this is done before the 60-day mark for singles or couple cover or within two years for family cover.
4. Why buy when you can borrow?
Paying for all the things a new baby needs can make a financial adviser sweat. Car seats, prams, cots, breast pumps and onesies they will grow out of within months can amount to thousands of dollars. Fortunately, the financial impact can be substantially reduced between gifts and loans from generous friends and family. If you need to make significant purchases, prepare early and do your research by monitoring the baby store sales in the six months before your due date. Don’t forget to make use of price matching policies!
5. Thinking about a private school?
If you’d like the option to send your kids to private school, the time to start investing is now! Tax-effective investment bonds can be useful, though a “debt recycling” strategy will help you receive the best of both worlds. If you have a mortgage, reducing your non-tax-deductible home loan as quickly as possible while earning a decade or more of compound earnings is an option.
Need more information? Your team at Capital Partners would be pleased to help. Get in touch to speak to an Adviser.
