Financial nesting: how to financially prepare to start a family

Starting a family is an exciting time, but with that comes a lot of change. Welcoming your first child means setting yourself up with the foundations of parenthood, from prams to cots to factoring in the ongoing cost of nappies. The earlier you can begin preparing your finances for your new arrival, the better. Here’s how to get started.

Explore the costs of medical care

The first step in your financial nesting plan is to consider how much you’ll need to spend on pregnancy and birth. For example, do you plan to give birth in a public or private hospital? Do you plan to consult with fertility specialists or undergo fertility treatment? While there are so many unknowns at this stage of the journey, awareness is key. Research the costs of different options so you know what you could need to pay. Remember, if you want to give birth in a private hospital and see a private obstetrician, you’ll need to have health insurance that covers pregnancy for at least 12 months before you give birth.

Forecast changes to income and expenses

The next step is to explore how your household budget might change when you have a baby. Increased costs and decreased income can cause cashflow challenges if not appropriately planned for. Create a mock budget using increased expenses and reduced income, to see how much wiggle room you have in your current financial routine.

Create a plan for parental leave

While you’re considering your household budget, it pays to make a plan for parental leave. Research any paid parental leave entitlements are available through your employer, and what government-provided parental leave you may be entitled to. This will give you some income numbers to work with when planning how you’ll balance your finances. Then, you can decide how you will fund any gaps. You might do this through personal savings, or through accessing funds like equity in your home.

You may find it helpful to plan for multiple scenarios. For example, you may plan for the primary caregiving parent to return to work after 6, 9 and 12 months. This gives a full picture view of what different scenarios could look like and gives you the understanding to stay flexible based on your own birth and parenthood experience.

Increase your financial stability and reserves

When financial nesting, it’s helpful to consider how much of a financial buffer you have available.

• Consider increasing your emergency fund to factor in more eventualities.
• Check in with your insurances like life insurance and income protection. Being responsible for a child may increase your need for contingency plans.
• If you can, increase your cash reserves and access to liquid funds. You might decide to set a tiered plan for how to access cash if you need it, either for unexpected costs, or unforeseen impacts to your income.
• A high interest savings account like the Bendigo Bank Reward Saver may pay a bonus rate of interest when you increase your balance each month. If you’re building up a baby buffer, this could be a great place to start.

Create a plan for childcare and returning to work

When the time comes to return to work, you may enrol your child into childcare or rely on family or community support. Planning out a few different scenarios in advance can help you consider the costs from all angles. Childcare centres often have long waitlists, so it pays to get on top of things early.

You may be eligible for the Child Care Subsidy, which offers means-tested financial support for approved childcare options. Many childcare providers have a Child Care Subsidy tool on their website, which can help you estimate your costs and subsidy.

Having a plan in place is the best way to prepare for your new arrival. If a new banking set up is on the horizon for your next chapter, browse Bendigo Bank savings and transaction account options. And if you have lump sums of cash to lock away for the short term, a term deposit may offer a way to earn consistent interest.