Having children costs money, and these costs tend to escalate quickly from pregnancy through childbirth and into maternity leave. One of the most important things you can do is ensure that your financial planning remains on track throughout this period.
Here are some tips:
During your pregnancy
Ensure uninterrupted medical aid cover
Before even contemplating falling pregnant, it is advisable to enrol as a member of a medical scheme. Most medical schemes in South Africa will not cover the costs of your pregnancy if you enrol after you have fallen pregnancy. Pregnancy and childbirth are expensive, and it is advisable that you seek the most comprehensive cover possible. There is a range of reputable medical aid schemes in South Africa that provide varying levels of cover for pregnancy and childbirth.
Before falling pregnant, make a concerted effort to fully understand your medical aid benefits. Specifically, determine to what extent your medical aid will cover regular visits to your obstetrician, including ultrasounds and blood tests. Further, ensure that the maternity hospital you have chosen falls within your medical scheme’s network of hospitals, and determine how long your medical aid will cover you for in-hospital stay after the birth of your child.
If possible, obtain a quote from your obstetrician for the birth of your child, whether by c-section or normal birth, and check with your medical scheme that these costs will be covered. Other hidden expenses may include the costs of a midwife or doula, post-birth checkups, or medical costs that arise as a result of complications.
Consider a gap cover benefit
Gap cover is essentially short-term cover that funds the difference between what specialists charge for in-hospital treatment and care, and what is paid by the medical aid. Many obstetricians, paediatricians and other specialists charge in excess of medical aid tariffs and, in the absence of a gap cover policy, this difference will be for your pocket. There are a number of gap cover providers in South Africa that offer varying levels of cover, with premiums ranging between around R250 to R450 per month. However, bear in mind that most gap cover providers will apply a maternity waiting period of between 10 and 12 months, so be proactive about finding a suitable gap cover policy.
Plan your maternity leave
By law, all employers in South Africa must provide female employees with four consecutive months of maternity leave, although they are not obliged to pay you during this time. Check the terms of your employment contract to ensure exactly what you are entitled to in terms of additional leave and pay. If you have been contributing to the Unemployment Insurance Fund (UIF), during your maternity leave you will be able to claim between 30% and 60% of the salary that you earned while contributing to the fund (depending on your salary). However, first prize is to reach an agreement with your employer in respect of your maternity benefits. Most employers want to act in the best interests of their employees.
So schedule time with your employer to discuss your needs, with a view to negotiating some form of income during your leave period, while also ensuring no interruption in your pension fund and medical aid contributions.
Put away additional savings
Once you have clarity with regard to your maternity leave and pay, you will be able to calculate your financial shortfalls and plan accordingly. Start as soon as you can to build up a savings account earmarked specifically to cover the shortfall in your budget. Together with your partner, prepare a realistic post-baby budget that covers your maternity leave period, and then work out the shortfall that exists. Put money aside each month to ensure that by the time baby comes you have built up a reserve fund to tide you over.
Earmark your baby funds
As soon as you can, start putting money aside into a baby fund that is earmarked for costs such as baby, clothes, prams, car seats, nappies, formula and toiletries. Use a savings account, money market or fixed deposit to house these savings to ensure that your money is easily accessible. There are so many hidden and unforeseen costs associated with having children, and your future self will thank you for setting this money aside.
Having said this, avoid falling into the trap of buying every possible gadget for your new baby. Speak to other young parents and do your research online before buying baby gear.
After the birth
Claim from UIF
If you are on maternity leave, you can claim unemployment insurance from the UIF, provided that you contributed to the fund for a period of more than four months prior to going on leave. Before going to your nearest Department of Labour, ensure that you have all the appropriate documentation with you, including certified copies of your ID, application forms, payslips and bank statements. You will also be required to submit a medical certificate or your baby’s birth certificate when applying.
Add your baby as a dependant on your medical scheme
Ensure that you add your new baby as a dependant on your medical scheme to ensure that he/she is covered. Your healthcare advisor should be able to assist you with this process. Bear in mind that healthcare expenses in the first year of a child’s life can be enormous, so you need to ensure that you have selected the best plan option for you and your family.
Update your will
With a new dependant, you will need to update your will accordingly and appoint guardians for your minor child in the event that you are no longer around. You may wish to add your child as a beneficiary in terms of your will and/or set up a testamentary trust to provide for him/her in the event of your death.
Amend your life cover
Together with your financial adviser, you will need to reassess the quantum of life cover. Should you pass away, you will no doubt want to make provision for your child and one of the easiest ways to do this is by increasing your life cover accordingly. Remember to also check that the beneficiaries of your life policy are correct.
Save for your child’s education
Start saving as soon as you can for your child’s tertiary education, as this will give you at least an 18-year investment horizon to work with. Given this horizon, you will be in a position to invest in a growth-targeted unit trust portfolio to take advantage of long-term market returns.