How to budget for having a baby
21 February 2023
Welcoming a baby into your life can be a wonderful and joyous experience. The new arrival can even bring a deeper sense of purpose – and, inevitably, a lot of extra bills.
“Many young couples discover that the cost of caring for a baby is much higher than they expected,” says Shafeeka Anthony, mother of two children, and marketing manager of JustMoney.co.za, a site that helps educate South Africans to make good money choices.
“Informing yourself about the financial implications before you fall pregnant can help you differentiate between expenses that you can’t avoid, and products and services that are well marketed, but that you don’t really need.”
Acquiring baby basics
JustMoney spoke to some industry specialists to determine major expenses when planning a family.
It’s estimated that South African parents spend, on average, around R100,000 a year to raise a child, says Madikana Kekana, head of customer experience at life insurers MiWayLife.
Setting up a nursery can cost R5,000 or more for furniture, a baby-changing station, and related equipment. “Feeding equipment will vary in cost, from bottles and sterilisers, to bottle warmers and formula. Parents are looking at up to R5,500 to cover their baby’s feeding needs,” she says.
First-time parents can expect to pay at least R10,000 for the essentials, notes Saul Salzman, managing director of Dis-Chem, which owns Baby City. These include a receiving blanket, clothing, nappies and a diaper bag, wipes, bottles, pacifiers, formula or a breast pump, a cot and bedding, a changing table, a pram and a travel seat.
As your baby grows, there are additional expenses to consider, such as child-proofing your home and selecting an appropriate car seat. Parents returning to work and requiring the support of a nanny, au pair, or crèche can expect bills of R33,500 to R70,000 a year.
“These statistics are daunting, but careful planning can help you to navigate this major life stage,” says Anthony. JustMoney offers the following tips when planning for a baby:
Assess your current financial situation: Determine your total annual income and weigh this up against your expenses. Checking your bank statements is a good starting point to determine where your money goes.
Prepare a baby budget: List all of the services and products you will need and start planning how best to source them at a reasonable price. Check where you can cut back on expenses.
Read a JustMoney article on setting up a budget you can stick to.
Check your employment contract: Find out which parental benefits your company offers. South African employees are entitled to four consecutive months of unpaid parental leave. You’re also eligible for a maternity benefit of up to 60% of your salary if you’ve contributed to the Unemployment Insurance Fund (UIF).
Maximise your medical aid: Medical treatment is expensive, so belonging to a medical scheme is an essential part of your financial planning. Check what’s covered for the birth and related medical experts. Keep costs down by giving birth in a hospital that’s part of the scheme network, and using specialists who also form part of this network. Don’t opt for expensive add-ons, such as a private room, if you can’t afford this.
Explore gap cover: This helps cover shortfalls in your medical aid – for example, if you require a specialist who is outside your medical scheme’s network, or a doctor whose bills are higher than the scheme’s rates. There are generally waiting periods for benefits, so apply sooner rather than later.
Start saving: It’s always advisable to build up an emergency savings fund to cover your costs for about three months. When choosing a savings account, compare how much interest you can earn, the costs associated with the account, and the entry amount.
Life cover: This insurance is of great value as it provides financial support for your family, and could take care of your outstanding debts if you die. A level premium means that you’ll pay the same amount every year. An age-related premium is cheaper initially, but there are compulsory annual escalations.
Draw up a will: A will is a legal document that sets out instructions regarding inheritance, guardians for children under 18 years, and the executor of your estate. A will must be signed by yourself in the presence of two witnesses.
“Speak to a financial adviser about the above matters. An adviser is uniquely qualified to help you manage your money and secure a future for both you and your baby,” advises Anthony.
JustMoney offers the following general advice relating to a new baby:
- Put together an online registry: Friends and family can contribute any amount they wish towards a gift, and you’ll receive things you actually need.
- Tap into support networks: Ask family members for help with babysitting and cooking. Prepare baby food and household meals in bulk and freeze them.
- Buy multi-purpose items: Look out for multi-use items, such as a changing table that doubles as a storage unit. Consider buying quality second-hand items such as strollers and gently used baby clothing.
- Buy nappies in bulk: It’s cheaper to buy nappies in large quantities than to buy them weekly.
- Don’t go overboard with clothing: Babies outgrow cute outfits within a few months, and baby shoes are unnecessary. Buy clothes on sale. For example, at the end of winter, buy half-price clothing for the following winter, in the appropriate larger size. Many outlets offer affordable, quality, second-hand baby and toddler clothing.
“Don’t get hooked in by clever marketing and believe that every appliance and educational toy is necessary for your baby’s development,” advises Anthony. “Focus on the fundamentals, such as good nutrition, and space and time to play.
“When you invest in insurance and other financial products, do your homework first, shop around, read the fine print, and only deal with established, reputable brands.”
Read a JustMoney article on insuring your children.
JustMoney.co.za is a trusted voice within the personal finance sector. The JustMoney website offers articles, money management tools and a wide range of financial products and services. Over 250,000 South Africans subscribe to the newsletter to stay informed and become financially savvy. Find the website here.
Caption: Babies bring many additional bills, so plan ahead in order to cope with the financial demands, advises JustMoney.
Issued by: Meropa Communications
On behalf of: JustMoney.co.za
Contact: Judy Bryant [email protected], cell 083 286 7168