Things to consider when planning for a family
Starting a family is a life changing event. Most people think about the lifestyle changes associated with having a baby, but few give adequate consideration to the financial impacts. When planning to start a family, there are a few financial considerations that you should try to plan for before the baby comes along. Below is a list of a few of the main ones:
- Do you have enough cash to support one income after the birth?
Expenses after having a baby are more than likely to increase however income in the shorter term is likely to decrease as the mother will be off work and the partner may take time off work or reduce working hours to provide extra support during this time. It is therefore crucial that thought is given beforehand on who will be off work and for how long after the birth of a child and whether you have sufficient income and or cash reserves to meet your living expenses in the period after the birth.
- Will you be eligible for Family Tax Benefits A & B after the birth of the baby?
Family Tax Benefit A is an income means tested benefit. If your family adjusted taxable income is less than $94,316 you may be eligible for Family Tax Benefit A which is up to $5,736 per year.
Family Tax Benefit B is paid to help single parents and one income families. If the primary income earner has income less than $150,000 and the spouse has income less than $5,037, you may be eligible for Family Tax Benefit B which is up to $4,117 per year.
- Paid Parental Leave Scheme or Baby Bonus
After the birth of a child in Australia, you will be eligible for either the parental leave scheme or baby bonus. There is a Centrelink calculator to determine which one will be more beneficial for you given that the parental leave scheme is income tested. The link to the Centrelink calculator is:
The baby bonus is currently $5,294 (paid fortnightly for 13 instalments) and the Parental Leave pay is $10,260 paid for up to 18 weeks.
Medicare Safety Net
The Medicare safety net pays up to 80% of out of pocket out of hospital costs per calendar year. There is usually a spike in medical costs when having a baby so it is useful to register for the Medicare safety net and during the pregnancy, keep all medical receipts and then take to Medicare at the end of the year and see how much you can claim back. Below is a link to register for the Medicare safety net:
Private Health Insurance cover that includes pregnancy related costs
This point is particularly important if you intend to go to a Sydney private hospital and choose your obstetrician. Generally the higher private health insurance policies will provide some coverage for obstetrics and pregnancy related claims. The catch is however, that there is a 12 month waiting period after sign up before you are able to claim on these items through private health insurance. This means that you have to have the right private health insurance cover in place at least 3 months before becoming pregnant to be covered by the private health insurance.
The above are a few of the main points to consider when planning for a family however professional financial advice is recommended so that you can balance the lifestyle and financial aspects of having a family and ensure that you are prepared and have covered all bases. This way you will be able to focus on what is important, the baby!
James Gerrard is one of Australia’s top 50 Financial Planners and has been helping Sydney siders make good financial decisions since 2001. James regularly helps people in Sydney who are planning to start a family. To contact James, visit www.financialadvisor.com.au