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Family Budget Series #1 – Preparing for the arrival of your baby
05 September 2013
Having a baby is one of the most life changing events that can happen to you. Aside from the upcoming changes in your life, it is important to prepare financially for the arrival of your new baby. By Rachel Stocker from BT Financial Group.
Some of the major expenses to consider in your budget are:
- Cost of birth
- Furniture and other essentials
Your income levels may also be impacted through:
- Financial assistance
- Changes to income
If you and/or your partner plan to leave work for any length of time after the birth of the baby, the change in income in addition to new expenses that come with having a baby could be significant. Below are some possible expenses and ways that your income may change associated with having a baby for you to incorporate into your family budget.
Cost of birth
When making the important decision of whether to go public or private, not only do you need to consider the birthing experience but you need to take into account the additional costs involved if you decide to go private.
There are minimal medical costs when having a baby as a fully public patient. Ultrasounds, blood tests, pathology costs and education classes are usually covered by the hospital.
The cost of having a baby as a private patient depends on many variables. As a private patient you have the choice of obstetrician and hospital. According to private health insurers NIB, the cost of a private health pregnancy and birth can be anywhere from $2,445 to $8,355 after the Medicare rebate of between $2,022 and $2,111. Private health insurance does not cover out of hospital expenses like obstetrician appointments. Obstetrician's fees can range from $2,000 to $10,000, depending on the specialist and how many appointments are required. Currently only one third of Australian women choose to have a private obstetrician for their birth.
Furniture and other essentials
The impact on your budget may be major or minor depending on whether you are buying new, second-hand or reusing preloved items. The good news is that you can make a list and relatively easily research what the expected cost of many of these items is, even if you don’t intend to purchase now.
Here is a starting list of some of the items that you may choose to purchase:
- Changing table and mat
- Baby capsule/Car Seat
- Pram or stroller
- Playpen/safety gates
- High chair
- Portable cot
- Bedding (wraps/sheets/blankets)
- Bottles, teats, bottle brushes and steriliser
- Nappy bag, nappies, baby wipes, washcloths
- Baby monitor
- Baby bath
There are a number of different childcare options available if you intend to return to work after having the baby and choose to place your child in childcare including:
- Childcare Centre: care for children under school age, offering developmental programs designed for children's age groups.
- Family day care: experienced carers or educators who provide care and developmental activities in their own homes. Care is usually flexible and can be tailored to suit each family's needs.
- Nanny: employed by the family on either a live in or live out basis to undertake all tasks related to the care of children.
A survey performed by the Australian Bureau of Statistics shows that in June 2011, more than 1.9 million children usually attend some type of childcare for an average of 17 hours per week. In 2011 families spent an average of 7.5% of their disposable income on childcare fees and according to the childcare workers union United Voice, the average childcare fees are more than $70 a day. In some cases though childcare can cost significantly more than this before any rebates or benefits are taken into account.
There are a number of payments and services available to support parents with the costs of a newborn baby.
Maternity/Parental Leave: Some employers pay maternity/parental leave but they are currently not required to provide any paid maternity or paternal leave. Australian employers are only required to provide 12 months of unpaid leave to permanent employees who have worked for at least 12 months prior to taking parental leave.
Paid Parental Leave: The scheme provides eligible parents with up to 18 weeks of Parental Leave pay at $606.50 per week (before tax). These payments can be made before, during or after any paid or unpaid leave from an employer.
More information and eligibility requirements on Paid Parental Leave
Family Tax Benefit Part A (FTB Part A) is a payment paid for each child. The payment is income tested and is based on your family's individual circumstances. You may be eligible for FTB Part A if you have a dependent child or student aged up to 22 and care for the child for at least 35% of the time.
Family Tax Benefit Part B (FTB Part B) gives extra help to single parents and families with one main income. This payment is income tested. You may be eligible for FTB Part B if you have a dependent child or student up to age 18 and care for the child for at least 35% of the time.
More information and eligibility requirements on the Family Tax Benefit Part A and Part B
Health Care Card provides concessions on health care costs, allowing you to get cheaper prescription medicines and medical services funded by the Australian Government. This card also gives access to services provided by the State and Local Governments (public transport and education costs).
More information and eligibility requirements on the Health Care Card
Child Care Benefit helps cover the cost of child care. To claim the CCB you must use approved care, be responsible for paying the fees, have your child immunised, be a resident and meet the income test.
Child Care Rebate: The CCR pays up to 50 per cent of the out of pocket expenses for child care upto an annual cap of $7,500 per child per year. Importantly, the CCR is not income tested subsequently families which have an income that exceeds the eligibility to access the CCB can still access the CCR should they meet the other requirement as set out for the CCB (even though the CCB assessment maybe rated at zero). Recent figures produced by the Australian Government confirmed that up to 100,000 families currently using approved childcare are not claiming their child care rebate subsequently missing out on a collective sum of approximately $190 million in government payments.
Changes to Income
Your household income may drop if you take time off work to have and look after your baby. As many as 36% of mothers return to work before their baby has turned one and 54% are back at work before their child is two for financial reasons according to the Australian Federation of Business and Professional Women. Early preparation and budgeting will help you adjust to your new lifestyle on a reduced income.
Some employers have generous maternity leave schemes. When these are combined with other benefits you may be entitled to such as annual leave, long-service leave and government benefits you may be able to take a significant amount of time off work without major impact on your short-term income.
We hope that the above information provides a starting point to help you prepare financially for the arrival of your new baby.