Baby coming? It's time to get your funds in order. Finance journalist and father of two young boys Evan Schwarten has five budget tips dads should know.
There’s no way around it: babies cost a lot of money. Just how much varies from family to family, but it could sit anywhere between $3000 and $13,000 in the first year alone.
Meanwhile, a baby’s arrival often coincides with a temporary or longer-term drop in household income as you or your partner take parental leave or switch to part-time work. So, here’s how to financially prepare for your new arrival.
1. Your financial state of play
It’s spreadsheet time. Write down your household income taking into account any expected time off work for you or your partner, and add in your actual weekly and monthly expenses. Make sure you include everything from the compulsory (insurance, utilities, mortgage/rent, car repayments) and essential (grocery bills, internet, petrol), to the discretionary (poker night, beer).
Now add baby. It’s estimated that a child will go through about 6,000 disposable nappies by the time they are fully toilet trained (usually around two and a half years old which, at anywhere between 17 and 50 cents a nappy, adds up to between $1,000 – $3,000), and keep in mind the big budget killers such as childcare ($2,200 per month based on $110 per day before the Child Care Subsidy), and all the new household items caring for a baby comes with.
Once you have a clear picture of your finances with the added cost of bub, you will have a better idea of what you can do without. Unfortunately, it’s the entertainment and related expenses that are the first to go so think fewer dinners out, beers with the boys or big holidays in your immediate future.
2. What you’ll spend on baby gear
The cost of having a baby adds up quickly. Strollers can run anywhere from $70 for the most basic model to $1,600-plus for a top-of-the-line Bugaboo; and cots can stretch from $120 to $850. Then there’s baby car seats (from the Target version at $150 to $750 for high-end designs), electric breast pumps ($150-$350), baby monitors ($40-$500) and much more.
Setting up for baby can set you back several thousands of dollars but by shopping around you can save a lot of money.
Still, there are some used items you should avoid for health and safety reasons: cot mattresses are considered a no-no, and the cots themselves may not meet current standards if they are more than a few years old.
If you’re looking at a second-hand car seat, consider that you may not know if it’s been in an accident or even just left out in the sun — meaning the plastic may be weakened and no longer provide protection when your baby needs it.
Specialty stores: Dedicated stores like Baby Bunting are generally the most expensive option, but do carry name-brand products. Look out for sales.
Hire: Good option for baby capsules which are of no use after baby’s first six months (unless you’re keeping it for child number two). Try Hire for Baby.
Pay it forward: For those in need, there are charity groups that supply donated baby and children’s equipment, essentials and toys such as Sydney-based Mummies Paying it Forward.
3. Government payments you’re eligible for
For many people, the arrival of a baby also means spending time talking to Centrelink. Warning, they won’t be fun encounters — the online systems sometimes (read often) fail, calls can take hours and, if you visit an office, there’s every chance you’ll line up for ages, only to be told your inquiry would be better dealt with over the phone or online.
There’s no alternative. Best advice is to be well prepared for any encounters, get onto everything as early as possible, and familiarise yourself with the payments you may be eligible for. Getting there before opening time can also help you get in and out quickly. These are the major ones:
What’s available: Up to 18 weeks at $753.90 per week.
Who gets it: The birth mother or adoptive parent, and other guardians in some instances. You can also split the pay — say 10 weeks for mum followed by eight weeks for dad — but only one of you can claim at any given time. Also as of July 1 2020, a Flexible Paid Parental Leave option was introduced, this provides flexibility around how and when you access Parental Leave.
What else do you need to know: There are a few criteria to meet. For instance, the person claiming must have worked in 10 out of the previous 13 months, with income (including all sources) of $150,0000 or less in the previous financial year.
What’s available: Two weeks at $753.90 per week.
Who gets it: Includes baby’s biological father, birth mum’s partner, adoptive parent, adoptive parents partner and person caring for a child born of a surrogacy arrangement.
What else do you need to know: The idea is partners get to take a couple of weeks off to be with their child and support their partner. You need to claim in the baby’s first 12 months.
What’s available: Up to $ 189.56 per child under 12 per fortnight (Part A), and up to $ 161.14 per child under 5 per fortnight (Part B).
Who gets it: Families who earn less than the threshold (Part A); and single-parent families, one-income families, or carers who are the grandparent or aren’t the direct parent (Part B).
What else do you need to know: The Family Tax Benefit is designed to help lower-income families, so the amount you may be eligible for decreases as your income increases.
Remember, to claim you’ll need a MyGov account, and supporting documents including your Tax File Number, proof of income, immunisation records and others. Here’s what you’ll need to claim Dad and Partner Pay.
4. Public versus private hospital
While there are many options outside the traditional hospital system (think home births and birth centres), we’re focusing on the question of public versus private.
One of the great things about living in Australia is that you and your partner can go to a public hospital and have your baby delivered at a relatively low cost (though you can still fork out up to $1500 for tests during pregnancy). The question of whether to go private is one of comfort and support, as well as cost. Here’s what you can expect.
Public (in a ward or shared room)
Your partner may be discharged the same day as giving birth, with a midwife scheduled to visit at home, or may spend several days in hospital recovering (especially if she’s undergone a C-section), and learning how to feed and care for your baby.
Unfortunately, you may not be able to stay with her the whole time unless she scores a private room. That means your partner will have to rely more on hospital staff — you’ll get some good sleep, but you’ll also miss precious first moments with baby.
For complicated pregnancies or if there’s risk of a difficult birth, doctors may advise that baby needs to be delivered in a public tertiary hospital — with specialists and a neonatal intensive care unit.
As a private patient, you get your choice of doctor. And in a private hospital, you will have your own room if one’s available. There is usually also a greater nurse-to-patient ratio in private maternity wards, meaning more support, care and advice (which you’ll likely need a lot of).
Private patient in a public hospital
To keep out-of-pocket costs down, there’s a third option: using private health cover at a public hospital which will allow you to get a private room if it’s available and you have the right level of cover.
A mum’s perspective (who’s tried both)
Brisbane mother of two, Kelly, went through the public system for her first child, albeit with a private room, but switched to a private hospital the second time around. If you can afford it, she recommends going private.
“The first time around we were living in Sydney and the private pregnancy management fees were around $5000,” Kelly says. She decided to go through the public system.
“I needed to have a caesarean and, while the surgery itself went well, we found there was just very little support once we got to the ward,” she says.
Kelly and her husband found it hard to get any help from the hospital nurses, who seemed constantly run off their feet. She had trouble with breastfeeding early on but, she says, got very little useful advice or support from the nurses until a lactation consultant could see her four days later.
For their second child, Kelly and her husband opted to go to a private hospital in Brisbane, which was a much more pleasant experience.
“Everything just went more smoothly,” she says. “The rooms were nicer, the staff were friendlier and much more supportive, and they did a much better job of managing my pain.”
5. How much life insurance you need
Parenthood brings a lot of extra responsibilities. One of them is making sure your family will be looked after in the event you aren’t around to care for them yourself. It’s not a nice thought, but a necessary one to consider. Having appropriate life insurance cover for both you and your partner will help ensure that if one of you dies, your family will at least be okay financially.
Option 1: Purchase life insurance through your super
One way to purchase life insurance is to include cover as part of your superannuation. This is one of the cheaper options available but be careful: the level of cover you receive through your default super insurance option may not be enough to meet your family’s needs.
Let’s say you’re in mid thirties, earn $120,000 a year and have a mortgage of around $600,000. If you were to die tomorrow, your family would need to a lump sum of around $850,000 to cover the mortgage, funeral costs and provide a financial buffer as they adjust to life without your income. However, it’s entirely possible your super life insurance policy will only pay out a couple of hundred thousand dollars. You can opt for a higher level of cover within your super, but doing so can hurt your returns and cost you at retirement.
Option 2: Purchase direct
Purchasing life insurance directly will give you more freedom to find the right policy for your family and more control over the amount of cover you receive. Your lump sum may also be paid out more quickly this way.
Whichever route you take, ensuring your family will be looked after will take one big worry off your mind so you can focus on more immediate concerns — like changing nappies and making sure you and your partner get enough sleep.