Starting a family

7th December 2010

There are a lot of uncertainties involved in starting a family – from choosing the right nappy strategy through to working out the best approach for disciplining your little bundle of joy.

Starting a family also has its own unique set of financial implications that you’re likely to encounter for the first time. Here are our tips for financial health while you’re starting your own family.

A new budget

Now that you’re planning for the birth of a child, take some time out amongst the preparations to consider your finances. Take a look at your budget and adjust it to take into account:

  • the amount of time you and your partner will be away from work. If you’re employed, your employer may grant you paid maternity and paternity leave, and many mothers are entitled to twelve months unpaid leave after having a baby. Consider how time off work will affect your family income and adjust your budget accordingly.
  • medical costs associated with childbirth. Your health insurer and medical practitioners will be able to indicate the extent of these costs.
  • any additional health insurance cover you may require.
  • general costs associated with raising a child, such as clothing, nursery items, prams and so on.

Budgeting for these costs will help you to manage your income and expenses during the early years of starting your family.

Government benefits

Depending on your circumstances, you may be entitled to Government assistance in the form of one or more of the following benefits:

  • Maternity Payment (previously the Baby Bonus and Maternity Allowance).
  • The Family Tax Benefit – an ongoing payment to assist with child rearing costs and to assist single parent families.
  • Child Care Benefit – an ongoing payment to assist with your child care costs.
  • Maternity Immunisation Allowance – a one off payment for your child’s immunisation.
  • Large Family Supplement – for families with three or more children.
  • Multiple Birth Allowance – assistance for those having a multiple birth involving at least three children.
  • Rent Assistance – ongoing rental assistance for lower income earning families.
  • Health Care Cards – access to concessions on medical expenses.
  • Double Orphan Pension – assistance in caring for a child who is an orphan.

Your eligibility for these benefits will depend on a number of factors such as your income level, your residence status in Australia and the age of your children.

Family assistance

If you’re unsure of your eligibility for any of the Government’s family assistance schemes, speak with your financial adviser or accountant, visit www.familyassist.gov.au or phone the Government’s Family Assistance line (13 61 50 from 8am – 8pm Monday to Friday or 13 12 02for information in languages other than English).

Taxation advice

Now that you’re in the family way, reconsider your tax and income arrangements. There are some tax concessions specifically available to parents, such as the Child Care tax rebate that covers a portion of your out-of-pocket child care expenses for approved child care. (Out of pocket expenses are child care fees not already covered by the Australian Government’s Child Care Benefit). Speak to your financial adviser to ensure that your family is minimising tax wherever possible.

Deciding whether or not to go back to work

Obviously, you will have personal factors to consider when deciding whether or not you should return to work, but financially, consider your current financial situation and your plans for the future.

The significant costs of modern day child care will also come into play if you’re not one of the lucky few to have full time family members available to care for your kids. Incorporate a realistic estimate of child care costs into your budget and assess whether the personal and financial incentives for returning to work justify the costs of child care.

Your child’s financial future

As a responsible parent, you may have already considered securing your children’s financial future by starting a regular savings or investment program. Speak to a financial adviser for advice on the best savings and investment program for your family. They will consider the economic environment, your financial situation, your goals and the level of investment risk you’re willing to take to come up with a financial plan best suited for your family’s needs. As those needs change, your financial adviser will also be able to adapt the plan to your changing circumstances.

Another vital step in securing your children’s financial future is to take some time to create a Will and inform your family and friends of your wishes for your children and your assets should the worst happen. You should be able to bind your superannuation provider to distribute your superannuation according to your wishes if you make a ‘binding nomination’.

When considering insurance, remember that obtaining insurance, such as life, disablement and salary continuance insurance, through your superannuation account can be a very tax-effective and efficient way to ensure you and your family’s financial future.

More children

With all of these steps in place, there’s nothing to stop you from having many more children, right? Whatever your family plans, we wish you and your new family the best of luck!

Always speak with your financial planner when making decisions about your financial future.

Source: Zurich Investments Australia

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