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Are You Financially Prepared for a Baby? The Awkward Money Conversation Every Couple Should Have Before Family Planning

Team Jar
December 13, 2022
Are You Financially Prepared for a Baby? The Awkward Money Conversation Every Couple Should Have Before Family Planning

Are you planning to add a new member to your life and create a beautiful family? Consider the financial implications and have extended discussions to clear your economic route. Study this blog till the end to find out what awkward conversations are necessary before having a baby.

Baby planning is one of the most critical stages of your life.

It is when you decide to turn around your life forever and prepare yourself for the arrival of your newborn.

As an expectant parent, planning for your baby is just not limited to buying cute baby clothes and accessories and choosing baby furniture, but it also means deciding financial expenses you need to bear once you have a kid onboard. 

Amidst celebrating the joys of expecting a newborn, discussing monetary situations can seem trivial or at some levels, even awkward.

However, being open and transparent with every detail is critical to plan your financial structure for the baby.

Therefore, stop hesitating and have the following money conversations with your partner to enjoy the comfort of family later:

Discussion 1 - Debts, Resources, and Obligations

Getting prepared for a baby isn’t just physical and emotional.

Being financially sound is also critical as you need to manage several expenses that come with the arrival of your newborn.

Before, you plan on making a family, ensure you have room to accommodate extra expenses that come with the arrival of your newborn.

One of the smart things to do is to get rid of your existing debt and free up a chunk of your expenses that can be useful in funding the family expenditure. 

Creating a family is a joint decision, so ensure that you discuss the depths of debts you and your partner have before you create a financial roadmap for family planning. Figure out if these debts are short term (credit card payments) or long term (home loan EMI, car loan EMI) and how soon can you repay them off. 

Next, talk about your resources and current investments.

It’s important to analyze what investments you can multiply and which assets you can benefit from selling.

Additionally, discuss your emergency funding choices. If you already have one, decide to maximize it for the baby.

However, if you don’t have one, talk about how you can set it up, where to keep it, and when to use it. 

Discussion 2 - Budget Planning and Cost Cutting

The next aspect to discuss pertains to budgeting and limiting expenses.

It can get awkward when you record, track, and realize your personal and joint expenses are over and need minimizing.

You may even differ in your opinions regarding a particular expenditure being necessary or unwanted. 

However, staying truthful during the conversation will help you put forward your thoughts and find a middle ground.

Baby planning requires you to cut corners and save money wherever possible.

Tracking your expenses is critical to analyzing your money-spending habits and patterns.

Budget planning also includes thinking about your future expenses.

Outline the things you’ll have to purchase when the baby arrives home. Furnishings, baby-proofing the space, getting a nanny, etc., are a few on the list. 

Discussion 3 - Income and Employment Prospects

One discussion you must have before starting a family is income and employment.

It pertains to discussing whether both of you will work pre- and post-delivery or whether one parent would like to be a stay-at-home parent. 

If both of you decide to work, then you must consider the schedule for leaves and income prospects.

However, if one of you will work, it’s critical to expand your income sources and returns.

Since the burden lies on one, you must find a balance between work and life. 

If you’re both employed, consider the maternity and health coverage offered by your companies.

These discussions will help you initially define the household cash flow and available income.

The workplace benefits at each other’s jobs will help determine your route to take for baby care. 

Discussion 4 - Systematic Investment Planning

In today’s time, just ‘saving’ money doesn’t suffice.

You need to have a proper investment plan that can help you accumulate bountiful returns in the long run of life.

If you’ve just started climbing the ladder of investments, we suggest you start small and steady with investing in mediums like Systematic Investment plans (SIPs) that can help gain maximum returns in minimal time and prepare for the future. 

SIPs are methods through which you invest in mutual funds in small, periodic installments.

The amount for SIP depends on several factors, including current income and the ultimate goal you’re investing it for like your child’s education or their marriage and even your retirement. The sooner you start investing, your chances of receiving a handsome return increases manifold. 

Therefore, consult a financial advisor and begin your systematic investment planning as soon as possible.

If you’re investing in multiple SIPs, keep each one associated with a particular purpose, like education or health. 

Discussion 5- Education and Future Expenses

Parents aim to make their children’s lives as smooth and convenient as possible.

However, it involves thinking about education, college, and such expenses.

Discussing with your partner all these areas beforehand will ensure a clear and simplified route. 

You can find room to save for primary education until the time comes to prepare for the college fees.

However, you can consider scholarships, contributions from grandparents, and other sources that can minimize your burden. 

Also, future expenses will face the impact of inflation.

Preparing for it is critical as what we can afford today may become unaffordable tomorrow. 

Discussion 6 - Updating Crucial Legal Documents and Creating a Will

Having a baby should awaken you that you need to update and secure your legal documents.

Now that you have an heir to your family, you should create a will for unforeseen circumstances. 

The essential legal documents that you must prepare beforehand include:

  • A Power of Attorney stating who will make decisions after you become incapable or unfit. 
  • Will should contain the name of the person(s) you entrust with your child if any unfortunate thing happens to you. In other words, you choose a guardian for your baby. 
  • Updating life insurance and the beneficiary’s name is critical to ensure a trustworthy person takes care of the family with the remaining wealth. 

After revising all these documents, you must either keep these with you at secure locations or give them to another credible person. 

Discussion 7 - Significant Decisions Like Purchasing A Home 

When you decide to start a family, you may even consider moving to another place.

Suppose you’re living in a place insufficient to accommodate a new member or would like to shift to a better environment for the baby (like the suburbs). In that case, it requires a critical financial assessment. 

The expenses involved in finding a suitable place, signing, and shifting, all become a part of the financial decision.

Also, if you’re moving, you might have to invest in new furniture and bear the certain miscellaneous cost (maintenance and renovations). 

Thus, when you decide to have a baby and a new home, the financial considerations will rise.

You must discuss with your partner whether you wish to take home loans or consider private lenders.

These decisions will impact your overall finances immensely. 

Discussion 8 - Adding the Child to the Insurance

Another crucial baby planning decision involves discussing insurance.

You must add your kid to the health insurance policies for protection.

Similarly, you need to review your insurance policies and plans and make adjustments if needed. 

Since the living expenses increase with a child, your insurance coverage should increase to accommodate this rise.

Moreover, you must consider a term life policy, disability insurance, and other options to safeguard your family in any unforeseen event. 

Discussion 9 - Tax Advantage Discussions

Discuss the tax advantages you can apply for with a baby.

The government offers deductions for kids’ tuition fees, etc. If you don’t know about these aspects, a quick consultation with a finance expert should help you streamline how to manage your tax regime for your kid. 

If both of you decide to work post-baby, you’ll have to consider how much you benefit from the tax breaks. It is crucial for your finances because you can save more money. 

Bottom line

Finances play an essential role in all the stages of your life, including planning for a baby. While discussing these aspects with your partner, ensure no reluctance or hiding lies between the two. It will help reach a fruitful conclusion. 

Consider these discussions the beginning point of preparing your finances for the baby. Baby planning isn’t just cuteness and giggles. A lot goes behind the scenes to ensure your family stays happy, healthy, and secure for the future.