Having a baby is a truly life-changing experience (in the every sense of the word). And there’s no doubt that caring for your little bundle of joy is going to require enough of an adjustment without you worrying about baby-related expenses. We’re going to give you the hard truth here: based on the average middle-income household in South Africa, it’ll cost approximately R90 000 to raise a child, per year. That’s a staggering R1 620 000 by the age of 18, and that’s before we’ve even considered tertiary education. It’s a serious long-term commitment.
Before you reach for the Rescue Remedy, it’s important to remember that people with less income than yourselves have still managed to raise, educate and clothe wonderful, happy and healthy children. How? With a solid financial plan that starts before a child is born. As part of our Money Mailer parenting series, this article aims to help you create your own financial plan so that you can be sure that the new addition to your family will always be provided for.
Setting a pre-delivery budget in preparation for your little one is a great idea. The benefits of this are twofold: it’ll give you some time to build some baby savings, which in turn, will help alleviate costs once he or she is born. The last thing you want to do when you’ve just had a baby is to try to figure out a new budget. The earlier you can establish a budget and start saving, the better.
When you are working out the pre-delivery budget, it’s also a good idea to upgrade your medical aid scheme to a full comprehensive package and add your baby onto it. You want to make sure that baby and mom are totally covered because the out-of-plan costs of having a baby are frightening.
If you are not in the financial position to upgrade your plan, then taking out gap cover is essential. This is also the perfect time to set up an emergency fund for any unexpected expenses along the way. Even if you can only put a couple of hundred rand away at a time, it’s a good start. If you find that you never touch it, keep putting towards it anyway. You’ll benefit from it in the long term.
Babies are expensive. While you don’t have to have to worry about school fees and extramural costs quite yet, you’ll be surprised at how much a new baby can cost, especially the first one. Let’s just take a look at some of the average initial costs (the non-medical basics).
Car seat: R800
Baby grows: R70
Blankets and linen: R800
Toiletries R 200
Nappies: R300 (a month)
Those are just the essentials. You’ll still need things like creams, nappy bags, dummies, change tables, carry cots and more. You are looking at a good R16 000-R20 000 to get started, and an additional R2500 in monthly costs. To ensure that you can afford the expenses of a new baby, make sure that you have already set aside money before the baby arrives, and have established (and stick to) a solid baby budget once you have had your child. It’s easy to get carried away in the baby section of your favourite store but don’t. We’re not saying don’t buy cute things, only that you should do so responsibly.
There are also a couple of smart ways to cut costs once you’ve had your baby. The first is to see what you can find in second-hand stores (items such as cribs can be found for much less than new ones). Another fantastic way to accumulate some of the basics is to set up a registry for your baby shower. Or if any family and friends who already has children, ask them if they have any ‘hand-me-downs’ they wouldn’t mind giving you.
After the initial costs of delivery, and caring for a baby, it’ll be time for another financial shock: the cost of preschool and school. This calls for an increase in your savings and a recalculation of your budget. As you’re well aware, the costs don’t stop at the fees associated with the institutions alone, but stationery, books, uniforms, extracurricular activities and their associated costs. For preschool, you can expect to pay around R3000 (just for the cost of the preschool, not including any other associated costs) and approximately R30 000 a year for secondary school. University can come to R40 000 a year (depending on the course – we go into more detail about university fees in How Much to put Aside for your Child’s Education.
While there are ways to ensure you save a little during the preschool and school phase, it’s vital that you save enough for their schooling before they reach this age. This may mean prioritising when it comes to the budget – after all, a good education for your child is more important than a nice car. Weigh up what’s important to you and budget accordingly.
The practice of saving for a baby and budgeting will set you up in good stead for saving for the future and your retirement. While carpe diem is a great concept, it’s essential not to get too swept up in the present that you forget to save for your future. The unfortunate reality is that most retirees don’t save adequately enough to enjoy their golden years without money worries. While looking after your children comes first, you can’t afford to let your retirement savings suffer. Instead, let the lessons of baby budgeting help you set yourself up for retirement at the same time.
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