Money might be the last thing on your mind when you’re expecting a baby but it’s a critical component to successful pregnancy planning, says Errol Meyer, Legal Specialist, Advisory Services at Standard Bank Financial Consultancy.
Falling pregnant is usually a time of high emotion, congratulations and excitement about the new addition to the family. However, it should also be a time of very careful financial consideration to ensure that this pivotal time in one’s life isn’t remembered for the financial difficulties involved.
“It probably doesn’t come across as very romantic to start talking about finances when you find out you’re pregnant but it’s a really serious consideration that you simply have to bear in mind when you’re expecting a new child,” says Mr Meyer. “Probably the biggest thing to bear in mind is that there are almost always a lot of unexpected expenses that one did not foresee.”
Everything from the cost of the birth, which can easily range from R25 000 to R35 000, to complications during delivery and the subsequent medical costs must be considered.
Here are some of Meyer’s tips for ensuring the costs of pregnancy don’t catch you by surprise:
Check with your employer to find out the length of your maternity leave and whether any of it will be paid. By law, all employers in South Africa must grant female employees four consecutive months maternity leave during pregnancy but they are not obliged to pay you during this time. Check with your employer beforehand to avoid unnecessary contractual disputes.
Make sure you are aware of what is covered by your scheme and what isn’t. The first thing to realise is that it is unlikely a medical aid will cover you after you have fallen pregnant. Your medical aid needs to be in place before the pregnancy commences. Medical aid schemes also offer different options, typically ranging from budget to premier, all providing different amounts of cover. If you’re on a budget option you might only be allowed to have the birth at a specific hospital network while certain things like C-sections, home birth or post birth consultations with a mid-wife may not be covered.
South African citizens who are on maternity leave can claim unemployment insurance for up to four months, with pay-outs varying dependant on your gross monthly salary up to an individually calculated maximum a month. Make sure you have all the appropriate documentation in place beforehand, such as your most recent two payslips, certified copies of your ID, the appropriate application forms as well as bank statements.
After raising five children, Meyer speaks from experience when he says that people always over-spend on the first child while the last child has to make do with hand-me-downs. “When you’re expecting your first child you want the best pram, the cutest baby clothes and the best cot you can afford,” says Meyer. “But I can tell you that when the fifth child comes around you’re quite happy to put your baby in a second hand pram”. Meyer advises dividing your baby gear into essentials versus nice-to-haves. For example, a quality car seat with the necessary safety rating is an essential item that one shouldn’t skimp on. However, when it comes to prams you can usually make do with a more affordable option.
As with any financial plan, ensuring that you start saving well in advance of the actual event can pay huge dividends. Start putting away money long before the actual pregnancy commences and start buying supplies such as disposable nappies in bulk long before the birth. Avoid over-spending on things like the baby shower and cut down on other unnecessary expenditure like going out to restaurants in order to save for what really matters, your new-born.
Given that most post-birth complications usually occur in the first trimester it may be prudent to revise all life assurance policies to give you peace of mind in the event of the worst occurring. Perhaps revise the terms of the policy to make it appropriate for your current situation.
Make sure that your financial advisor guides you in respect of the underwriting requirement, that full disclosure was made to the insurer, that you have considered exclusions, possible premium and risk benefit increases, or tailor-make the ancillary benefits relating to your specific circumstances.
Make sure that your Last Will and Testament is up to date to prevent hardship for a surviving spouse or family members who may be required to look after your children should something go wrong.
Open a savings account, or a long term investment account for the benefit of your child. A small amount will give an early head start which will harness the power of compounding interest and may just make those education costs negligible in later years.