This article was contributed to us by AIA Singapore.
Becoming a parent and carrying your baby for the first time is one of the greatest joys in life that money cannot buy. However, it would be a mistake not to plan your personal finance situation in preparation for the arrival of your child.
Very often, parents are caught up in the excitement of welcoming their little one that they overlook the financial aspect of raising a child. Here are 10 financial to-dos you need to plan for before your baby comes along.
# 1 Delivery Cost
Delivering a baby in Singapore can be costly. According to the Ministry of Health, the average bill size for a normal delivery at a Class A ward in KK Hospital costs about $5,099. If you opt for a private hospital delivery, you should expect to pay much more.
To help reduce the cash you need to fork out, you can tap on your Medisave monies. Alternatively, you can opt for lower class wards, which would lower your bill.
# 2 Maternity insurance
Unexpected complications can occur during pregnancy. Some of these complications may lead to extra healthcare costs incurred during pregnancy.
For additional peace of mind, you can consider maternity insurance products such as AIA Mum2Baby, a two-in-one pre-natal insurance and savings plan that brings together the AIA Pro Lifetime Protector and the AIA Baby Protector. This combination provides comprehensive protection against pregnancy complications while also helping you save for your child’s future.
Expectant mothers can start receiving coverage from as early as 13 weeks into the pregnancy, and continue to be covered against death for up to three years after giving birth.
Right from birth, your little one will be covered against congenital illness for up to three years. You can also transfer the AIA Pro Lifetime Protector to your baby, within 60 days of birth, without any medical check-ups, giving him or her guaranteed coverage from birth to adulthood.
# 3 Daily Expenses
Caring for a baby can be expensive. Once your child is delivered, your daily expenses are going to rise. Formula milk, diapers, baby care products, clothes and toys are all going to be things you need to buy regularly.
You need to review your monthly budget in order to ensure that you can afford these things without having to dip into your savings. Otherwise, it will just be a matter of time before your own savings run dry.
You may also need to re-prioritise how you spend and allocate your money each month. You may need to give up some personal luxuries such as an annual holiday or cut back on entertainment and shopping expenses each month.
# 4 Infant Care & Childcare Expenses
Unless either one of you isn’t working, you would need to make arrangements for infant care support once the maternity leave period is over.
A few common options available include sending your baby to infant care, engaging a full-time nanny, hiring a domestic helper or getting your parents to help. Regardless of your decision, all of the options will cost you additional money.
If you get your parents to help, you could pay them a token sum of a few hundred dollars each month for their assistance. If you opt for a full-time nanny, or a domestic helper, this can easily amount to $1,000 to $2,000 each month.
# 5 Additional Transport Needs
One practical cost area that many parents don’t consider, until they urgently require it, is the extra money they can expect to spend on transport with the arrival of their baby.
Families that don’t own a car may consider buying one for convenience sake. Those who already own a car may intend to upgrade to a bigger vehicle for more space. Even those who are satisfied with public transport may find themselves taking taxi and private hire car rides more often than they used to.
# 6 Review Your Emergency Savings Funds
In line with a holistic financial plan, you may have already saved six to nine months of your average monthly expenditure. This is great, however, with the arrival of your new baby, comes new areas of expenses each month. Your new six-to-nine-month emergency fund needs to be revised upwards.
To exercise prudence, you should incorporate these expenses into your emergency funds months in advance. So, be ready to save up more towards it.
# 7 Future Education Needs
It’s easy to put off planning for expenses that are only going to be required years down the road. However, given the escalating costs of tertiary education in Singapore, this is no longer an expense that you can expect to comfortably afford without prior planning.
The best way to ensure that you can afford the future education needs of your child is to start investing early and regularly. Long-term savings plan such as AIA Smart Growth (II) can help your savings grow through a combination of both guaranteed and non-guaranteed returns.
# 8 Your Insurance Needs
For the next 18 years or so, your child is going to be financially dependent on you for his or her living needs. This means it’s timely for you to review your current insurance coverage to ensure that you have sufficient life insurance payout to cover your child’s future expenses in the event that you are no longer around.
AIA Pro Lifetime Protector lets you do this, as well as offers you the flexibility to reduce your focus on protection and increase it to wealth accumulation once your children are financially independent. This way, you get to enjoy potential returns from your plan while still receiving protection against death, disability and critical illnesses.
# 9 Review Your Will
While Singapore does have an Intestate Succession Act, you should consider adjusting your will once you have a child to ensure that he or she will be taken care of in the event you and/or your spouse pass on.
This means you may have to review the beneficiaries on any insurance policies you own. You may also have to adjust any CPF nominations you previously made if you want to include your child.
If your will differs from the Intestate Succession Act, you may want to consider including how your property, investments and/or money should be distributed.
# 10 Your Child’s Insurance Needs
Last, but certainly not least, you should start considering the types of insurance plans that your child would need. These should include medical protection, in the event that they fall ill and require hospitalisation and possibly critical illness protection, to provide coverage against various types of critical illnesses.
AIA offers solutions that are made simple to keep up with your every-changing wealth accumulation and protection needs. With up to 30% savings on selected plans from now till 30 April 2018, there’s no better time to get your financial planning on track. So take the first step to Be Life Confident. Speak to us at 1800 248 8000 or visit www.aia.com.sg/BeLifeConfident.
DollarsAndSense.sg aims to provide interesting, bite-sized financial articles that are relevant to all Singaporeans. Subscribe to our free e-newsletter to receive exclusive content not available anywhere else. Also follow us on Instagram to get your dose of finance knowledge visually.