How to financially prepare for going on parental leave: setting your family up for financial success
Becoming a parent is an amazing and life-changing experience. As a new parent you will receive lots of advice on topics like ‘how to make your baby sleep’ and ‘what is the best pram’ but nobody really gives you advice on how your finances will change or the best way to handle the financial impact on your household and lifestyle when you have a baby.
If you’re considering having a child or you have one on the way, then there are a few financial questions to ask yourself before you go ahead and start painting the nursery.
Reviewing the home front
Firstly, have a think about how your family finances are structured and how they will work in a new phase of life (and on a potentially reduced income). By understanding how much your family spends and how that may change when you add more members to it, you can see what reorganising needs to be made to your financial goals, your bank accounts and spending patterns, and if you need to forego anything in the short term to accommodate this change.
The government’s Money Smart website has great resources to help you determine your current spending levels and get you started in your discussions.
Super doesn’t have to be a scary word
How will your superannuation balance be affected by the fact that you’re going to have a family? If you know you’ll be taking some time out of the workforce when you have children then you could consider equalising superannuation benefits with your spouse. Women currently retire with 38% less superannuation than men (ABS, September 2018), one of the leading causes of the super gap is the fact that women take more time out of paid work to work unpaid in the home. By sharing super contributions, even if only temporarily, you can reduce the disadvantaged that will occur when it comes time to retire.
Why not speak to your employer about continuing to be paid superannuation when you’re on unpaid parental leave. Believe it or not many employers will say yes to this request, but won’t necessarily offer it without being asked. If you’re a Verve Super member, we can assist you with this if you want!
Protect those precious years
It’s time to chat insurance. Before having children certain types of life insurance may not have seemed relevant; for instance, if you passed away there may not have been dependants left behind, or if you were injured and unable to work you may have been able to cover your own living expenses. Now with a child on the horizon, how your personal insurances are structured may become more important. It’s a great time to do an insurance review and think through the insurances you will need in the future given your changing family circumstances. This is incredibly important for peace of mind and protecting yourself and your loved ones.
It’s not too early to start thinking ahead
While you may currently be in the trenches of pregnancy or life with a newborn, time goes quickly and you should ask yourself if you want to start investing or saving for your child’s future. Maybe you want to set up a trust fund to help your child down the track or a grandparent wants to contribute to their education as a gift. Whatever it is and if you’re in a financial position to do so, then there may be ways of doing this that won’t affect the taxable income of the child, the parent, or the grandparent.
By considering these factors, organising your finances, and making some decisions, you’re laying the foundations to build a stable, wealthy future for yourself and your family.
About the Author — Alysia Laird
Alysia Laird is the Parental Leave Coach in Verve Super’s Support Squad. Verve has partnered with some of Australia’s leading women-led businesses to give members free access to experts and coaches when they need it most. Your finances change significantly when you have a child and financial planner Alysia Laird knows this first hand. If you are a Verve Super member Alysia can help you prepare for the financial impact that having children will have on your household, lifestyle, and future. Alysia supports clients at all stages of the wealth management journey through her business Zebra Tailored Wealth.
If you are an active Verve member, you can book a free session to meet with Alysia here.
This blog is published by Verve Superannuation Pty Ltd (ABN 65 628 675 169, AFS Representative No. 001268903), which is a Corporate Authorised Representative of True Oak Investments Ltd (ABN 81 002 558 956, AFSL 238184), as the Sub-Promoter of Verve Super.
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