How to manage initial baby costs

By Benjamin Salisbury

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Having a baby is a life-changing experience. Even with the best intentions and preparation, the immediate costs can be overwhelming.

You may need a Moses basket, cot bed, travel cot, changing table, changing bag, baby monitor, baby sling, swaddling blankets, buggy, car seats, baby mobile, formula, bottles and bottle steriliser, bibs, dummies and nappies - and that's before the baby arrives.

Dealing with changing financial priorities, including whether you would be better served by a different type of credit card, should be tackled as soon as you find out you are expecting a child.

After you've celebrated your growing family for a few days, it's time to reassess your finances and set in motion a plan to manage your budget with a baby.

1. Review debt and repay in the cheapest way.
Establish your current financial position and work out a way to repay any credit card debt before you go on maternity leave and your income drops.

"The main financial issue facing new parents is budgeting for a family on a reduced income, especially if Mum has been working," Nick Hill, money expert for the Money Advice Service, said in an emailed response to questions.

Pay back what you can before the baby arrives and switch the rest to a 0% balance transfer card to give yourself more time to repay it.

"Maternity and paternity pay are generally lower than average salaries, so find out about your statutory rights and what your employer offers," Abi Wood, head of campaigns at National Childbirth Trust (NCT) charity, said in an emailed response to questions. "NCT has useful information about new parents' pay and leave on its website."

2. Determine your immediate baby expenses.
Make a list of all the items you will need in preparation for the big arrival. Talk to other parents about the type of expenses you will face, and do your research on baby sites.

Work out which items you can borrow or acquire for free from friends and family, or on discount from consignment shops.

"It's worth seeing what you can get second-hand, as babies quickly outgrow their clothes, toys and equipment," said Wood.

Then, look at your list to see what's left.

"Saving is the best way to cover additional costs, and the earlier you start the better," said Hill. "You may also be able to cut back on spending in other areas of your budget."

3. Build a new budget.
Determine your expected future income as you and/or your partner take parental leave. Test yourselves on that budget before baby arrives so you can adjust where necessary.

"Most parents find they have to manage their finances much more carefully after having a baby," said Wood. "Make sure you're claiming all the benefits you're entitled to, such as child benefit."

Remember, your priorities will change as you edge nearer to the due date, and you'll very likely have to slash your existing spending. It's no longer about you and your partner, so shelve plans for that weekend break you've been promising yourself and focus on repaying debt or building savings.

"The best way to make sure finances are manageable is to work out a budget in advance," said Hill.

4. Consider how you'll pay for it all.
Research each baby-related purchase to find the most value-for-money option, without compromising on safety.

For new expenses as you are preparing for the baby's arrival, your best bet is to apply for a credit card that doesn't charge interest on purchases. Some cards offer 0% interest for up to 30 months, which can give you some breathing room to pay off all the new gadgets and gear, or even some remodelling if you need to prep the baby's room.

"Using a credit card also can be beneficial when purchasing bigger items so that they are covered by Section 75," said Hill.

This card should be for your initial expenses, not for spending continuously after baby arrives so that you can form a plan to repay it.

You can do this in one of two ways: determine how much you can afford to pay per month, multiply it by the length of the 0% interest period, and that's your baby budget.

Or, after you've purchased everything you need, put the card away to prevent further spending, then divide the total by the interest-free period and put that much (or more) toward the card each month.

"Before taking on additional credit, parents should think about how and when they will repay the money," said Hill.

As your baby is born and grows, you may need a cash back card or other rewards card, such as a grocery rewards card, to recoup some of your ongoing spending.

The best investment is a good budget
Be smart with your new baby purchases. Yes, you want to make sure your baby has the best of everything, but don't spend more than you can afford on high-end equipment or designer baby-wear that your little one will outgrow in a few months.

Unless safety is an issue, such as with car seats, it's almost always best to buy those initial purchases second-hand. This way, you avoid having to charge too much to a credit card, especially if the card isn't earning you any rewards or cash back.

The best investment you can make on your baby's behalf: running a household that is financially secure.

See related: Choosing the right card as your family grows, Section 75 and what it can do for you, Your heart is ready for a furry companion, but is your wallet?

Published: 18 July 2017