Having a child is a life-changing experience, and that extends to your finances. New estimates from the Australian Institute of Family Studies put the cost of raising a child at $170 per week for a low-income family ($680 per month) when you add up food, clothing, school and other expenses needed for healthy living.
Kids may be expensive, but they don't have to be a burden when you plan ahead and make sure your budget is flexible. Here are 7 tips to help keep your family's budget in check.
1. Save up an emergency fund
If becoming a parent means you or your partner have to give up your job, you need to be prepared for the loss of income. Even if you're covered by maternity pay, you should try to save up enough money to cover your expenses for several months to be on the safe side.
2. Eliminate unnecessary expenses
You don't have to wait for the baby's arrival to start tightening the purse strings. Take note of everything you're currently paying for and decide if you really need or want it. Whether it's impulse buys or gym memberships and subscriptions you don't use, cutting back on the little things could add up to big savings.
3. Follow the 50/30/20 rule
If you're budgeting for the first time, this reliable formula could help you to get into good spending habits. Aim to spend at least 50% of your outgoings on needs (food, bills, loans and other necessities), no more than 30% on wants and 20% towards your savings and urgent payments.
You might be tempted to move into a bigger home now there's a baby on the way, but consider if you really want that rent or mortgage increase. Some parents choose to move to a smaller home or trade down their car to free up some extra income. You should also think twice before splurging on top-of-the-line baby accessories when your little one will be happy with whatever you buy.
5. Keep reviewing your budget
Some expenses like cots and prams are one-time purchases, but budgeting is an ongoing activity. Your child's needs will change as quickly as they do, and you'll need to revise your budget if they start daycare, school or after-school activities.
6. Don't cut into your retirement savings
Some parents are tempted to dip into their retirement funds to cover more urgent expenses, but this could cost you a lot further down the line. You should look into other options such as consolidating your loans or finding ways to make money in your free time, like starting a business or selling things around your home.
7. Don't be afraid to ask for help
If you're worried about your finances, speaking to a professional could help to set your mind at ease. Debt Fix's financial advisors can offer free confidential advice tailored to your circumstances and explain all the options available to help you.