Young parents and those planning to set up a family should be able to make correct and responsible decisions about the future of their family. Because the cost of raising a child has increased significantly the recent years, parents will need to redefine their financial goals and create a new family budget, taking into account the new circumstances.
Moreover, they may have to consider buying a new home (an initiative that, according to the Nobel laureate, Economist Shiller is one of the most important in our lives, but also the most dangerous as an investment) or a new bigger car. Additionally, family planning should take account of new categories of costs such as possible medical expenses, clothing, equipment, nutrition and education of their child. They should, also, adopt a new life model, avoiding financial mistakes, such as over-indebtedness, lack of insurance, or the potential pause of savings.
Timely and effective financial planning to meet the future needs of their children will enable them to prepare themselves better for their own retirement years.
Preparing parents for the birth and upbringing of a child
The birth of a new child is a special event in everyone’s life. Along with the joy of the child’s arrival, there are also increased responsibilities and new challenges. In recent years, the cost of a child’s upbringing has increased significantly, which prevents young parents from thinking about a second or third child, causing serious demographic imbalances in the country. The birth of a child requires a redefinition of family needs as well as a revision of the existing family budget.
With the right planning and some valuable tips, future and new parents can be prepared appropriately to cope with the expected financial changes to the extent that new expenses occur with the advent of a child and the awareness of his needs.
The costs normally incurred with the birth of a child are:
The cost of shopping at retail outlets: Diapers and baby foods (which can be used at the same time, even if babies breastfeed) are very expensive. Later, when the baby’s eating habits change to solid food, the cost of proper new baby food should be calculated.
Housing costs: If the family does not already live in a large apartment, they may be forced to move as soon as the baby grows up enough in order to have enough space to meet the needs of the new family member.
The cost of traveling: If parents have a small car, it can be difficult or impossible to fit a child seat, or even unsafe, and they may need a new car. Or if they have a very old car, it may be necessary to buy a new, more reliable car for the child’s safety.
The cost of clothing and equipment and other general expenses: Young parents, given their limited disposable income, will be required to spend less on themselves and more on their child now that their priority should be the costs of the new member in the family.
Medical expenses: Additional costs will also be incurred for medical needs, especially in the early years of the child, as visits to paediatricians for vaccines are often required. Furthermore, health insurance premiums in a private insurance company will increase to effectively protect the new member especially in countries where there are shortfalls in the public healthcare sector (e.g. in Greece).
Daily Child Care and education Costs: Either decide a permanent solution in a specially designed space with specialized staff such as a day nursery or hire qualified staff for some hours of the day at home, the parents will need to bare certain costs.
The main factors, which young parents should think and evaluate, and the actions proposed for them, are:
Preparation: Young parents can take advantage of the benefits and rights provided by their employer and the state, which have been established for the above reasons. From maternity leave and care for the new child to various tax breaks and proper preparation before the arrival of the baby can reduce future anxiety about many financial problems.
Creating a new family budget: Family budgeting is of particular importance and before the birth of a baby. Knowing where the money is spent on a household allows parents to recognize unnecessary costs and cut them, saving resources that they can be available to their baby.
Estimation of the cost of the daily childcare: Day care for children is one of the most important factors that significantly increase the family’s cost of living. This may take place in the family home by the parents, the wider family of the child, pre-school day care specialists, or outside the home in nurseries, creative employment centers and other specialized places, with specialized staff. The rising cost of this can be a real dilemma for a new mother between staying with the child at home or returning to work. In some cases, the job income of the mother might be able to just cover the childcare. Therefore, a family should explore the choices that make sense for their own financial budget, as well as their own unique family and working conditions.
Lifetime protection: Beyond the immediate arrival of a child, it is important to examine and evaluate ways in which a family can be protected from unpredictable life events, such as an unexpected death, a serious illness or an accident. The appropriate life insurance option also includes financial assistance to cover potential household debt or the repayment of possible mortgages.
Saving for Education: Education is one of the most precious gifts that parents can offer to their children. Thus, many families spend a lot of time and money on this. Regular contributions to a separate savings account, even if they are, initially, small provide additional funds for better education or professional rehabilitation when the time arrives.
Saving for Emergencies: If you do not have emergency savings, now is the time to start on a separate account. If your child gets sick or your car gets damaged, if you need to move unexpectedly or you lose your job, you will be able to find the necessary resources in this emergency account. The contingency account should normally include an amount equal to three to six months’ living expenses. Also to guard against a possible job loss, experts suggest saving an amount equal to 24 months of income.
Financial education of children: Children begin to learn from their parents from the very first moment they are born. Gradual education on key concepts around money, such as distinction between needs and wishes and saving will provide the children with a good foundation for managing their money in the future for those and their families.
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