Last updated on Feb 10th, 2021 at 10:20 am

Certified financial planner Kim Potgieter says  your tiny bundle of joy does come at a price. “Having a baby is probably the most wonderful gift you can give to yourself – and the world. It’s a stage of your life filled with many breathtaking moments . It’s also a time filled with emotion – joy, laughter, gratitude and courage. You’ll need to have many discussions during the course of expecting and raising your child. But one of the most important conversations on your agenda should be about the cost.”

ALSO SEE: How to cope financially with a new baby on the way

Courageous currency conversations

These types of discussions are more than just talking about money and the financial implications of your new baby on the family budget, explains Kim. “It encompasses your values as a couple, the dreams you have for your children and the legacy you want to leave for your family. My advice is to have these conversations well before falling pregnant, because becoming a parent changes everything. Nothing really prepares you for the magnitude of the task, and when you’re feeling fragile, exhausted and sleep-deprived it’s generally not the best time to make big or tough decisions.”

Kim offers the following guidelines:

Consider your values as a family

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As parents, you’ll want to give your child the very best, but at what price and what are you willing to sacrifice? If you value spending time with your child, make sure your budget is based on a realistic income. You don’t want to be so busy working in order to fund your grand ambitions with your child that you’re unable to spend quality time with her.

Don’t live above your means

Make sure your financial decisions are anchored in sensible and realistic ambitions for your children. Ask yourself if attending a private school is essential, and if branded clothing or extravagant birthday parties are necessary. Have a clear guideline of how you’d like to allocate your money. Remember to include immediate needs – the cost of looking after a newborn baby can be quite significant – as well as future needs of your children. At the same time, consider your own investments and savings. Remember to keep contributing to your retirement funds and investments to safeguard your own financial future.

ALSO SEE: Insurance and medical aid policies you should purchase for your family right now

Update your financial plan

Planning for the future education of your child is only one part of your financial plan. Apart from planning for your life insurance, disability cover and investing into share portfolios, unit trust funds or a tax-free savings account, your financial plan must be updated holistically.

Take control now

Wealth manager Gugu Sidaki offers the following financial tips on how to future-proof your little one: 

Get appropriately insured

As a parent, your ability to generate an income is vital for you and your family’s wellbeing. Ensure it’s protected in the event of you losing your job, getting injured or dying. Your insurance should cover all expenses related to raising your child, such as school fees (including university), food, clothing, transport and housing. You must communicate these requirements to your insurance broker who needs to clearly demonstrate how these costs will be catered for with the cover selected. It’s also vital your cover grows at an appropriate rate. For example, the average private school increases their fees by 10% per year and your insurance cover should make allowance for this.

Create a sustainable budget that will allow you to build up an emergency fund. Aim to accumulate enough funds to cover three to six months of your annual expenses. This should be placed in an accessible account, such as a Money Market or 32-day account with your bank. Remember, life happens – children get sick, accidents occur and jobs are lost unexpectedly. You need to be financially prepared for the unexpected.

ALSO SEE: 7 common financial mistakes young parents make

Invest your savings once your emergency fund is built up

There are various options available to you, including portfolios where shares are bought and sold on your behalf by a stockbroker. Minimum investment amounts in a managed share portfolio are usually higher than most people can afford, so unit trust funds are a good alternative. These pool investors’ money into a single sum, which is then invested in a wide range of asset classes like shares, bonds, properties and cash.

The entry point for unit trust funds can be as little as R500 per month. Consider a balanced unit trust fund that has a bias towards equities, which have historically outperformed all other asset classes and are expected to continue doing so in the future. This will ensure your investment works hard for you and provides the required growth over the long-term.

An added benefit would be to house a portion of your savings in a tax-free savings account. You’d be allowed to invest a maximum of R33 000 per annum and R500 000 over the lifetime of the investments. The remainder of your investments would sit outside the tax-free savings structure.

Remember to be kind to yourself, says Kim. “You’re not going to be able to solve all the financial challenges to future-proof your child in one day. It’s not about sacrificing your relationship, time or health in order to save. Rather, it’s about saving as much as you can afford without compromising the happiness and wellbeing of your family. What’s important though, is discipline.

Change your will

Your will should be immediately updated once you have a child to ensure he or she is cared for should anything happen to you and your partner, says Kim. “This may include setting up a Testamentary Trust in order to hold or administer assets on behalf of your children. This is specifically important for children under the age of 18 years. You’ll have to nominate and appoint trustees who you believe will have your children’s best interests at heart and select a guardian to look after your children should you and your partner pass away.”

ALSO SEE: The importance of a will for your children