Are you and your partner financially prepared to have a child?

In part of the series we will explore the financial readiness before reinforcing your decision to have a child because today the world today is such that we find ourselves ever so unsatisfied with what it has to offer; from premium lifestyles to fulfilling personal aspirations, which could include anything between buying a house to annual international travels. In the midst of these multiple choices, the decision to bring a child into the world requires careful consideration, especially from a financial standpoint.

I am truly grateful to be with a wife who shares a similar approach to finances. Both of us are deliberate in our spending habits, carefully weighing our options before making purchases. We consistently ask ourselves, 'Do we need this?' or 'Do we want this?' This shared mindset not only strengthens our financial stability but also aligns us in preparing for the responsibilities of parenthood.

These are the the TOP 5 things that we had to consider financially before embarking on our journey to become parents:

Budgeting and Planning: My wife and I are very “Excel Sheet” people, we planned everything. We were so mentally and emotionally ready to become parents but it was essential to review our current budget and expenses. The way we went about planning was by dividing our expenses into two columns “Immediate expenses” and “Future Expenses”. So in Immediate Expenses the calculations included everything related to the costs of pregnancy (doctor’s visits, tests, food, etc) childbirth (hospital expense, doctors’ fees, follow-up sessions, etc) and initial baby supplies (we were fortunate here as we got loads of gifts from both sets of parents, friends, cousins and others). In the “Future Expenses” we had to factor in ongoing expenses such as childcare, education, healthcare and daily essentials. You might not necessarily stick to the plan, but it creates a map that you can follow and decide to take different routes depending on how the situation pans out.

Income & Work: Planning only works if you know where your income is coming from and how much you plan on saving. My wife’s and my thought process wasn’t limited to just getting that next pay cheque. We had to think far ahead in terms of what is the growth that we require in the future to sustain three human beings. What sort of increments should we expect year-on-year? Do we need to re-evaluate our current job? Is there a possibility to generate a second line of income? Being such obsessive planners, we were deep into this and just imagine this is just for one child.

Savings: Indians are known for their saving habits, I attribute my money practices to my father. He encouraged me to save from a young age and over the years it became a practice. All these years of working I always ensure that I saved up anywhere between 30% to 35% of my annual income. And this is helped me manage my anxiety and stress about the future, from a financial perspective. I also give a lot of credit to my wife for helping me and my family manage our finances and I love what she  once said to me; Indian families outside of the top 5% are one major medical crisis away from getting financially wiped out. So please plan your savings right.

Long-Term Financial Goals: Parenthood is a lifelong commitment but when you do it together it’s a breeze. Evaluate your long-term financial goals, such as homeownership, international holidays, big personal purchases, retirement savings and child’s education, both, primary and advanced, especially if you are looking to provide international exposure to your child. For this you will need to invest your savings into multiple financial instruments - SIPs, PPF, Equity, Gold, Govt Schemes, etc. It would be ideal to seek professional help but even if you want to go solo, things are quite simple and accessible nowadays. As a childless couple we wouldn’t think twice before spending money on frivolous things, but when planning for a child, you need to curb this instinct because every rupee counts. 

Insurance and Healthcare: I cannot stress enough on how vital it is to have a strong mediclaim policy. I recently had a medical emergency in the family and it cost us a large amount, thankfully we were equipped with a decent mediclaim and managed to offset at least 75% of the overall cost. So please research all sorts of insurance policies, starting with mediclaim. Consider additional coverage for your child's healthcare needs. Between you and your partner decide who will invest in what because within the insurance space too there are multiple options - life, term, cancer, etc.

So, coming to our question

Are you and your partner financially prepared to have a child?

I am not saying this will get you through your decision-making in terms of financial planning to have a child but this could prove to be a good starting point. There are many couples out there who just go ahead and have a child and figure things out, they and their child turn out fine. But it’s good to have a plan and understand the potential positives and negatives that allows you to reduce stress and anxiety