Few things are as exciting as sharing the news as expecting parents. The cost considerations can easily cloud the experience though. If it is your first baby you have suddenly transitioned from being independent to someone responsible for the care of a child and need to carefully watch what you spend. Lezanne Human, CEO of FNB Savings, Investments and Fiduciary, agrees that becoming a new parent can be very intimidating. “A new addition to the family brings with it expected and unexpected expenses, ensure that you save for both,” she says. “The sooner you start, the sooner you can take advantage of compound interest.”
When thinking of starting a family or planning for another child, you need to take into account all the different expenses that may come your way. It starts with finding out a little bundle of joy is coming, regular doctor visits, getting the baby’s room ready, the list goes on…
You are responsible for the care and wellbeing of your little one from the day you find out you are pregnant until the fly the proverbial nest. You need to plan for the things you have to save towards, and start saving early for better growth.
The magic of compound interest is that the earlier you start saving the betters. Compounding means that you are earning interest on interest, so the longer you invest for the greater your returns. Since you have time to build up your capital you will use compounding to your advantage instead of trying to beat the market.
The cost of living is rising, you need to structure your savings in such a way that you are able to keep up with costs. School fees, especially, can be a concern. These fee increases usually exceed inflation.
Human recommends that you automate your savings. Setting up a scheduled transfer each month will make it easier for you to start saving. Money is automatically saved, helping you save regularly instead of having to commit a large sum once an expense becomes a reality.
Before starting a family it is important to get your finances in order, balancing your child’s future expenses with other financial obligations is vital for the financial well-being of your family. Paying off debt and saving for your own future must remain top of mind while saving for your little.
Equally important is that you encourage savings in your children. Talk to them about your own savings plan, explaining how it works and why and for what you are doing it. Explain to them, the difference between saving for a short term goal as opposed to longer term goals that require more savings and planning. FNB offers a product called MyFirstSavings account, aimed at children aged between 0 and 16. Money can be deposited at any time and up to 25% can be withdrawn on 24-hours’ notice each month, while 100% can be withdrawn with a five-days waiting period. This makes the account a good option for teaching your children long and short – term savings.
As soon as you start planning your new family, you should get your family’s holistic financial plan in order. If in doubt, it is always good to contact an expert to assist you in ensuring your financial objectives are met.