Bringing up baby is a maturing investment

Bundles of joy can cost bundles of money, so be prepared for the bills, writes Bina Brown.

Bundles of joy can cost bundles of money, so be prepared for the bills, writes Bina Brown.

THEY may be adorable and challenging gifts of nature but, let's face it, having children is expensive. The medical bills will start to mount from the first visit to the GP to confirm the pregnancy. Then the expense of all the baby paraphernalia, from prams to cribs and high chairs.

Sure, the food bill might start out low if you are breast feeding but even that situation will quickly change as that cute bundle of joy starts devouring a box of cereal in no time.

In fact, the cost of child care and education should be enough to put people off procreating - but it doesn't.

McCrindle Research estimates the total parental cost to raise the average number of children in Australia (2.7) to age 24 to be $1,065,605.

Of course, not everyone will spend the same amount of money on toys, holidays, travel and dining and entertainment, private tutoring and sports that this figure includes but there will be costs and they can be substantial.

The other way to look at having children is as an investment. But remember, there are no guaranteed returns.

Feathering the nest

The super organised and budget minded might have been putting money aside for years to cover things such as time out of the workforce and additional expenses by starting an education fund for any new members of the family.

Others will welcome the news of a new baby first and then worry about how they are going to afford it all later. It is not uncommon that the child-rearing coincides with paying a mortgage, so sacrifices have to be made.

Everybody's situation around having children will be different.

If it's the case that one person in a relationship is planning to take time out of the workforce to care for a new baby, then the biggest financial impact will be surviving on one salary. Time out of the workforce will also have implications on that person's superannuation savings that may need to be addressed.

If you have time on your side, practise what it would be like and, perhaps, revise the budget based on one income to cover both essential living and baby expenses.

Babies definitely add extra costs, including trips to doctors, the actual delivery, nappies and bits and pieces including a cot, bedding and a pram.

The founder of an online directory of child-friendly businesses, Mums on the Go, Linda Anderson, advises keeping things simple.

"Babies and children do not need every gadget or toy on the market. Ignore the marketing hype and keep things simple," Anderson says. "You can always buy extra things later if needed."

She says other mums are probably one of the best sources of information about what's essential and what's not.

Talk to them to find out what things they found really helpful and what things they never ended up using.

She says eBay is a place to seek a bargain - either second-hand or recycled "new".

Baby markets are another source. "You will find lots of recycled 'new' baby clothes, still with tags on - the result of the abundance of clothes given to babies that often never get worn," she says.

If friends and family are offering to lend you items, say "yes" - your child won't care they are using things on loan.

Big-ticket items, or those with a short usage life, such as bassinets, capsules, cots and strollers, can also be hired, which can be surprisingly cost-effective.

If it is the case that two parents are going to keep working, then there will be child-care costs. These vary depending on the facility type.

Benefits for babies

Centrelink should be the first call if you are struggling to meet child-related expenses. You may be eligible for financial assistance.

The Family Assistance Office administers the baby bonus, available to most new mothers. Payments totalling $5437 are made over six months to help look after a new baby. The money is paid into a bank account and is there for you to spend as you wish.

The paid parental leave scheme is a new entitlement for working parents of children born or adopted from January 1, this year.

Parental leave pay is available to eligible working parents, who then get 18 weeks of government-funded parental leave pay at the rate of the national minimum wage (currently $589.30 a week before tax).

Parental leave pay and the baby bonus cannot be paid for the same child. If you meet the eligibility requirements for both payments, you can choose the payment best for your family.

Other assistance includes family tax benefit A, which is an income-based payment aimed at helping families with the cost of raising children. Depending on how much you earn, you can get up to $164 a fortnight for each child under 13 and up to $214 a fortnight for kids between 13 and 15.

Family tax benefit B is an extra payment for families with just one main income, including single parents and families with one main income provider. The limit for the primary income earner is $150,000 a year.

Recognising that one of the biggest costs of raising children is education, the government has a 50 per cent education tax refund. It helps parents on lower incomes cover education expenses such as textbooks, computers and a home internet connection. The tax claim can be up to $794 a year for each child in primary school and up to $1588 for each child in high school.

Kids mean a lot of decisions

AS A father of three children aged 13, 11 and nine, Matt Walsh knows a bit about the cost of kids. And deciding to have kids is only the first in a series of tough choices that would-be parents have to make like whether one of you will give up work and the almost inevitable private or public school debate. Those decisions will have a big financial impact.

"One thing people should do before they have kids is sit down and talk about the changes and sacrifices they are going to make," says Matt, who has a professional, as well as personal, interest through his work at Lifeplan.

Starting to think of ideas around how you can reduce unnecessary expenses, pay more of the mortgage and plan your career to get your income up can all be valuable before you have kids, he says.

Matt says financial education on how a mortgage works is important but knowing the nuts and bolts of compound interest and budgeting are also things that will help someone plan their lives with kids better. The big one though is "not to bite off more than you can chew".

"Don't send your kids to an expensive school if it means you have to work so hard you won't see them or it is too financially stressful that you can't take time off," he says. "The things that make kids happy is the time you spend with them, not the amount of money you spend on them."

TWO PHOTOS: Baby wise ... Matt Walsh.

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