18 Oct 2022 | 4 min Read
Author | 740 Articles
If there’s one thing you wish you’d known about being a parent before you became one, it is how expensive having a child can be. From diapers to health insurance and all of that baby gear, financial tips for new parents can help them prepare for the baby. Read the top five tips that can be of great financial help for new parents.
An emergency fund is money that you keep aside for emergencies. It is a good practice to keep about 6 months to 1 year’s expenses as emergencies.
As a baby comes home, your monthly expenses will increase so, you should increase the amount of your emergency fund also. For example, before the baby was born your monthly expenses were Rs 40,000 per month, and accordingly, your emergency corpus was Rs 4.6 lakh. After the baby is born, your monthly expenses increase to Rs 50,000, so then your emergency corpus should be Rs 6.8 lakh.
Also, at times working mothers prefer to take a sabbatical for a year or two to take care of the child. In such a case, the emergency fund should be bigger.
When many new parents get to know they should buy life insurance, it’s common to question whether or not it’s really worth it. If your spouse, child or other family member relies on you financially, then must definitely get it.
Like other forms of insurance, life insurance is designed to financially protect you and your family against worst-case scenarios in exchange for a monthly premium. It is affordable and for young and healthy adults, term life policies can cost less while providing the financial protection that your family needs in case an unexpected tragedy occurs.
Once you have a baby, you will need to add more financial goals to your list, focusing on the baby.
For example, once your toddler turns two, you need to put him/her into a preschool and these expenses are high. Hence, this is a goal that can’t wait. Ensure that you have the exact amount of money when your child gets admitted. One smart way to save money for this is to opt for fixed deposits. Since you are aware of the interest rate in advance, you know exactly how much money you need to invest to get the amount you need at the end of the tenure.
Plus, there are long-term financial goals like their higher education and their marriages. These goals are about 17 to 20 years away. However, due to inflation, this also means the costs to achieve these goals will be too high.
Once your child turns 90 days, he/she is eligible for health insurance. Since you cannot buy a separate health insurance plan for a child, you need to include his/her name in your health policy.
However, if you have not taken health insurance or you and your spouse are covered under separate individual policies, you should buy a floater health insurance policy that covers the entire family that includes your child’s name in it.
While life insurance is meant to provide financial safety in the event of your death, disability insurance offers coverage in the event that you become sick or injured and cannot work. Disability insurance will pay you a percentage of your income for the specified time period so you can take into consideration your current income, current expenses, and current savings when choosing a policy. This insurance can be short-term or long-term, and you can usually obtain coverage either through your employer or a private provider. When you are considering coverage, remember that your living expenses will increase with your newborn.
Raising a child takes a lot of effort. From proper nutrition to education, parents need to take care of their every need. Plus, you also have to make sure that his/her future is well secured. Hence to take care of such responsibilities, you need to be financially disciplined in the following years.
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