The presence of children is an important moment in the family. More than that, besides happiness, the presence of a baby has significant implications for finances. Need to arrange a different household finances after the presence of a baby. When my child was born, we prepared a lot, we and my wife, long ago. Starting from routine visits to the doctor, choosing a hospital to give birth to, buying baby gear to find a baby sitter.
Understandably, the presence of a baby has been waited for quite a long time, so we went through the process with exciting. All preparations that we consider important have been tried. However, there are things that are actually important, but go unnoticed. What is that? We do not manage family finances properly when welcoming the presence of your child. How to manage household finances is still the same as when you did not have children. Maybe it’s because we don’t know, but maybe because of ignorance, it’s not important.
In the first month of birth, our finances collapsed. Previously, we could set aside investments regularly. in that month, not only routine investment failed, even spending is greater than expenditure. Financial minus. We are forced to withdraw funds.
Initially, I thought this was just a momentary symptom because of the many needs in the early months. In fact no. This condition continued for 6 consecutive months without being able to brake. Finally, in order to stop this financial bleeding, I decided to look at and re-analyze all expenses. I record a month’s expenses every day
After the analysis, find a number of main problems, namely:
• Spikes in expenditure occurred. Spending almost doubled. Costs – fees that have not existed, appear in large numbers. For example, baby sitter salaries, food expenses and baby drinks, and clothing needs. Other costs for children’s future interests are also not small. There is education investment and insurance. This all makes the accumulation of expenses increase multiplied. I know that spending will go up, but I don’t anticipate that the increase will be this high.
• Our spending patterns have not changed. My wife and I still have the same consumption pattern as when I did not have children. Snack in the same place, the same shopping style on weekends and so on.
The result is clear, right? With our salaries still the same, while there was a surge in spending due to children’s needs while the old spending patterns did not change, it is not surprising, household finances became deficit every month.
After this incident added a number of references that I refer to, the conclusion is one that how to manage family finances is different. Managing finances when you don’t have children can no longer be applied. Need to apply a different method.
Children and Home Finance
What needs to be prepared by the presence of children? This is important. After understanding what the financial consequences are, then you can create a financial management strategy that is right on target. I met many friends who did not know, what are the financial consequences of the presence of additional family members at home. Even if you know, just a piece – piece, not comprehensive.No wonder the preparation from the financial side is chaotic. I noted a number of things that need to be anticipated:
1. Increased Spending
There are many additional costs that have not been available, such as children’s clothing and food, the presence of a maid or baby sitter and others, which affect household expenses.
Moreover, being excited about having children, the first child again, makes parents want to always give their best. The problem is that the best is rarely cheap, usually the price is expensive. Ends, the monthly expenditure becomes nothing.
The challenge is determining how much increase that still makes sense. Can be very subjective. Because the consumption patterns of each parent differ, so does financial ability to support this additional expenditure.
2. Educational Investment
Children’s education costs are things that must be prepared in advance. There is an additional allocation of monthly expenditure for educational investment needs. For that, a number of steps need to be done. If it is still hard to set aside education funds, it is necessary to prioritize. My advice starts from the closest, for example the need to enter kindergarten or elementary school. That’s the most urgent.
However, other levels of education need not be forgotten. Because the principle is that the longer we prepare, the lighter the funds that must be set aside. The key lies in choosing the right investment instrument. For the long term, over 5 years, I suggest placing in a temporary stock mutual fund, the short-term goal can be with gold money market mutual funds or mixed funds.In essence, the return given can offset the increase in costs every year. What about education savings?
3. Adding Emergency Funds
Having children means a great responsibility as a parent. If something unpleasant happens, its impact on the child as much as possible, especially essential things, such as education and health, is minimal. One way is to have an emergency fund. If before having children, emergency funds may not be a priority. Now with dependents, emergency funds are a mandatory component.
These funds are used for things that are not protected by insurance protection. For example, job loss or declining income. If the investment you have prepared has fallen, so there is not enough funds, the emergency fund can be used as an emergency fund.
The more family members, the greater the expenditure, the allocation of emergency funds must be higher.
Emergency funds are placed in financial instruments that are easily disbursed and the risk is small. The goal is not to look for profit levels but rather to the security and ease of access.
Instruments that can be selected for emergency funds include deposits, savings plans with interest above ordinary savings, gold or money market funds.
For those who do not have this allocation before, the demand for funds of that size usually feels burdensome. My advice, even though it might not be on target, the most important thing is to start it. Slow down as household financial capacity improves, the amount will be increased later.
4. Buy Life Insurance
Once there is a child, life insurance ownership becomes mandatory. Why? This is a form of parental responsibility to the child. If a parent dies, the child has financial protection. Insurance that will provide cover for your child’s life.
It should be carefully calculated how much life insurance coverage is adequate. Ideally, the insurance protection fund is sufficient to finance the lives of children into adulthood.
Protection needs must be matched with the ability to pay premiums. The greater the coverage, the greater the premium to be paid.
Try to choose insurance that is in accordance with financial goals. Because the goal is protection, optimize the amount of coverage. Make sure the amount is adequate.