Commencing a family is a major lifestyle milestone. As such, it is important to ensure that you can enjoy this time with your new family and not worry about your finances. This article explains 5 financial tips to help you prepare for a new baby.
1. Practise Living on a Single Income
During the 9 months of pregnancy it is an excellent time to accumulate funds to assist living on a single income. By "practising", you will not only be better prepared financially for your family, you will also build up additional savings to supplement reduced income following the birth of your child.
2. Convert Mortgage to Interest Only
By converting your home mortgage from "principal and interest" repayments to "interest only" repayments you may be able to considerably reduce your monthly mortgage commitments. You may also be able to extract "equity" from your property should this be required to establish a Cash Reserve (refer below).
3. Establish a Cash Reserve
Having quick access to funds in an emergency is paramount when starting a family. A Cash Reserve is generally established to meet unexpected items of expenditure. A Cash Reserve should be held in a separate account to your transaction bank account to ensure that it is only drawn upon in an emergency.
4. Check Government Entitlements
There are several government incentives available to young families. We have summarised the various incentives available in our article New Baby? The 7 key family benefits.
5. Review Personal Insurances
Having a family involves a long-term financial commitment. It is important to ensure that you have measures in place to ensure that your family is protected in the event of unexpected illness, injury or death. For details of the types of insurances available, click here.