Baby’s been delivered. Now what? Finance journalist and father of two young boys Evan Schwarten has five budget questions dads should ask now.
So you’ve survived the first few weeks of parenthood? You’ve become more acquainted with another person’s bodily fluids than you’d ever really wanted to and learned to live on less sleep than you’d imagined possible? Well done.
The last thing you want to do is think about money, but unfortunately your finances need your attention too. You’ve got some big costs to cover over the next few months (and years), and life will run a lot smoother with a little planning. Here are the questions you need to ask:
1. Have you missed any government money?
You may be entitled to more government payments than you realise. Don’t worry, there’s still time. And remember, registering your baby with Medicare is also a must. Here are the payments you should look into:
Paid Parental Leave is $719 per week for up to 18 weeks, and is supposed to top up lost income for the parent who stays home to care for the baby in those first months. It’s income tested, so to claim it you have to have earned less than $150,000 in the previous financial year.
It needs to be paid before your baby’s first birthday, so claim it by 34 weeks after the birth to allow the 18 weeks to be paid before the year is out. Also, don’t forget about Dad and Partner Pay, which will give you two weeks (at $719 per week) to be with your baby.
For lower-income families, there’s the Parenting Payment of up to $768.50 per fortnight for single parents and up to $496.70 per fortnight if you are in a couple. You and your partner need to earn less than $1940 a fortnight combined to claim a part payment. There are several other criteria you’ll need to meet as well.
Finally, check out the Family Tax Benefit Part A and B.
2. What are you covered for?
If you and your partner have been relatively healthy, you’re probably now spending more time in medical facilities than you’re used to. That’s not going to stop any time soon. There will be check-ups, vaccinations, viruses, rashes and much more. Here’s what is and isn’t covered by Medicare:
What’s covered by Medicare (at least partly):
● GP visits (many practices bulk bill children)
● Specialist visits (expect some out-of-pocket expenses)
● Tests such as X-rays and blood tests
● Eye tests (recommended at around four years)
● Most surgical procedures in a public hospital
● Most therapeutic procedures performed by doctors
● Hearing tests (recommended at around four years)
What’s not covered by Medicare:
● Private patient costs at hospital
● Hospital and medical costs while overseas
● Dentist visits (recommended at around 12 months)
● Allied health services like speech pathology
● Glasses
● Hearing aids and other devices
Most childhood vaccines (due at birth, two, four, six, 12 and 18 months, and four years, plus annual flu shots) are covered by the government.
Your partner may also require some additional care after giving birth, starting with a check-up with an obstetrician at four to six weeks.
Some women also require pelvic floor physiotherapy (costs vary, but commonly sit around $145 per session), or treatment for postnatal depression, which may require treatment with a psychologist. If that’s the case, private consultations cost around $250 an hour, although you may be able to access short-term government support through a Mental Health Plan.
To take out private insurance or not will depend on your circumstances. Most vital services are covered by Medicare, but private cover will give you more options. If your child needs to undergo surgery in the public sector, you’ll have no say in which specialists you see, which hospital you go to or when the surgery will be. With private insurance, you may have more choices.
Extras Insurance can also help out with dental visits and glasses. If you already have private health insurance, check that your child is added to your policy so they are covered from birth.
3. Do you need income protection?
Ask yourself what will happen to your family if you or your partner can’t work. If one of you is injured or struck down with an illness that knocks you out of action for months, how will your family pay the bills? If the answer is ‘I don’t know’, it might be time to look at income protection insurance.
Income insurance will pay the equivalent of a percentage of your wage while you recover, allowing your family to pay the mortgage or rent and put food on the table in the interim.
Of course, the amount you can claim and the length of time you can claim for vary by policy. Normally, the insurance will cover up to 75 per cent of your income for a set period and will continue to pay out for several years.
Income protection insurance is another cost, so you’ll need to find room in your budget. The good news is it’s often tax deductible, but talk to your accountant before purchasing if you intend to claim a tax deduction.
4. What are your childcare options?
Childcare is expensive. Really expensive. In fact, some Sydney parents are forking out up to $200 a day to keep their child in care — thankfully, the average paid by most Australians is lower.
According to the latest figures from the Productivity Commission, the median weekly cost of 50 hours of long day care – that’s a week – in the ACT is $560, followed by NSW and Victoria ($490 each), WA ($475), and Queensland ($417). Here’s what to expect according to Care for Kids:
● Nanny ($17-$35 per hour plus agency fee)
● Au pair ($200 to $300 per week depending on hours worked)
● Long day care centre ($70-$185 per day)
● Family day care ($7.50-$16.80 per hour)
● In-home care ($20-$25 per hour)
● Babysitter ($15-$35 per hour)
Most families are eligible for the Child Care Subsidy, but the amount of rebate depends on income. For example, a family earning up to $66,958 would have 85% of their childcare costs paid, but those earning more than $171,958 (up to $251,248) would only receive a 50% subsidy. Other hoops to jump through include activity tests and immunisation requirements. Find out what you might be entitled to with the Child Care Subsidy Estimator calculator.
There are a few ways to reduce costs:
● Shop around: The cost of childcare can vary quite a bit from one suburb to another. For example, according to Domain, it costs around $151 per day to put your child in care in Hampton, in Melbourne’s south east, while in nearby Brighton the cost is $125 per day.
● Share a nanny or au pair: To reduce the cost of hiring a nanny or au pair, try sharing their services with another family. The challenge will be finding a schedule that suits everyone.
● Get grandparents involved: Many grandparents play a major role in the care of children. This can be great for everyone: grandparents and children get special bonding time, and you get free care. But don’t take advantage of their generosity (and stamina) by pushing for the full five days a week. A better option is to alternate between grandparent days and paid childcare; your child could spend one or two days a week with their grandparents and the rest at a childcare centre or family day care.
● Look at flexible work options: Is it possible for you or your partner to change your work schedules to reduce the amount of childcare you need? Perhaps one of you could work weekends or nights, or work longer hours on some days to allow you to have a day off during the week to spend with bub.
5. Private or public school?
Sending your child to a private school will likely be the biggest child-related expense you have, and starting these conversations is key if you’re considering an elite private school with long waiting lists.
By some estimates, the cost of putting your child through the most expensive schools from preschool to Year 12 is nudging $500,000. Choosing a faith-based education is cheaper, but still expensive, while even sending your child to a public school isn’t free — there are still uniforms, books, backpacks and more to buy.
According to the ASG Planning for Education Index, you should expect to spend around $351,684 to send your child (born in 2019) to a private school from preschool to Year 12, compared to $148,016 for a faith-based education and $78,232 in the public system in metropolitan areas.
If you choose to go with a private school, there will also be some one-off costs such as application fees that can be anywhere from $100 to $500, and admission fees ranging from $500 to $2500.
Of course, the amount you pay will differ from school to school but these figures should give you an idea. Whichever path you choose, it’s important for you and your partner to have these conversations now so you can start saving.
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