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Planning a family: How to get your financial affairs in order

The more time you have to prepare for your child’s arrival, the better equipped you will be financially.

If you’re planning to have children, don’t wait until you fall pregnant before you make financial provisions for your child. While we all know that having children is expensive, keep in mind that knowledge is power – and the more time you have to prepare for your child’s arrival, the better equipped you will be financially. Here’s how to get your financial affairs in order when planning to expand your family.

Your healthcare cover

Ensuring that you have adequate healthcare cover in place is something you should take care of before you fall pregnant. Applying for medical aid and/or gap cover when you are already pregnant can result in having waiting periods imposed on you. For instance, if you apply for medical aid membership while pregnant, the medical scheme can legally impose a 12-month maternity waiting period on you during which no claims relating to your pregnancy and childbirth will be covered. Similarly, if you apply for gap cover when already pregnant, most gap cover providers will impose a 10-month maternity waiting period. Note, however, that these waiting periods do not apply to your child. Once your child is born and duly registered on your medical aid and gap cover, they will be covered from birth. Medical schemes require that you register your new baby within 30 days of birth.

If you’re planning to give birth in a private hospital or birthing centre, bear in mind that there are still likely to be out-of-pocket expenses. Childbirth in private healthcare facilities can range between R16 000 and R25 000, and if you require a Caesarean section, this could cost up to R45 000. If you’re planning an elective C-Section, be sure to check that your medical aid covers C-Sections that are elective and not medically necessary. Remember, the obstetrician, anaesthetist, and attending paediatrician can charge up to six times the medical aid tariff and, depending on your medical aid and gap cover benefits, part of these costs can be for your personal account and should therefore be budgeted for in advance.

To help save costs and plan accordingly, find out whether your medical aid offers a maternity programme that can provide significant benefits in terms of obstetric appointments, pregnancy scans and ultrasounds, pathology and ante-natal classes which are covered by the scheme and not funded out of your medical savings account. Also important to keep in mind is that, if you decide to give birth in a hospital that falls outside of your specified network, you may be left with significant out-of-pocket expenses, so be sure to check in advance with your medical aid.

Costs during pregnancy

Taking care of your health during your pregnancy will no doubt include essential pre-natal supplements such as folic acid and multi-vitamins, which can range between R180 and R450 per month. Pregnancy Pilates and/or yoga classes can cost around R500 per month. If you’re planning on a natural birth, private ante-natal classes are recommended and can cost up to R2 500 per couple. Remember, not all pregnancies are complication-free, so it is always advisable to make extra room in your budget for other potential costs such as physiotherapy, additional pathology and scans, and unscheduled check-ups.

Something that is often overlooked is the cost of maternity wear, especially if you are working and need appropriate attire. Maternity clothing can be expensive, so do your research into the basic necessities that you require to have a functional wardrobe, and then budget accordingly. Ideally, look for versatile clothing that can be worn after the baby is born. 

Maternity leave

When it comes to planning your maternity leave, keep in mind that all employers are obliged to provide their female employees with four consecutive months of maternity leave although they are not obliged to pay you during this time. Before falling pregnant, check the terms of your employment contract to ensure that you know exactly what you are entitled to in terms of leave and pay.

If you have been contributing to UIF, you will be able to claim between 30% and 60% of your income during your maternity leave provided that you contributed to the fund for a period of more than four months before going on leave. As such, when it comes to updating your budget, be sure to account for the reduction of income you can expect while on maternity leave. Once again, keep in mind that not all pregnancies go according to plan, and it is advisable to build extra fat into your budget. For instance, you may need bed rest in the months leading up to childbirth, have a child with birth complications that will require you to take extended maternity leave, or suffer from debilitating morning sickness which leaves you unable to work or generate an income for a number of months – and all these eventualities need to be financially planned for.

Updated household budget

When it comes to updating your household budget in preparation for your baby, it is important to identify the once-off upfront costs and costs that will be ongoing. Upfront costs can include renovating the baby’s room, purchasing essential baby equipment, or even upgrading your vehicle to a more convenient and/or child-friendly car.

Prams can cost anywhere between R2 000 and R20 000, cots between R1 000 and R12 000, and car seats between R600 and R6 000. You will also need to budget for cot mattresses, baby monitors, bottles, breast pumps, blankets and linen, and baby clothing. As a tip check your local markets, such as Facebook Marketplace, for many of these items as they are only needed for a very short period of time and therefore items that are second – or even third hand – are often in perfect working order at a more affordable cost.

Your ongoing costs will include items such as nappies and formula, which can each cost around R8 000 in the first year of your child’s life. If you intend to visit a private mom and baby clinic, you will also need to build in the costs of post-natal visits, breastfeeding clinics, and baby vaccinations.

Once your baby is born, you will need to register them as a child dependant on your medical aid and, depending on your medical scheme, these costs can be significant. The child dependant rate on a basic hospital plan is around R820 per month, while on a more comprehensive plan you can expect to pay R1 500 per month. It is likely that you will need to increase your life cover to provide adequately for your child in the event of your passing, so be sure to build additional life premiums into your post-baby budget.

Childcare and/or daycare costs

If you’re planning to be a stay-at-home mom, you will naturally need to factor your loss of income into your household budget. The transition from a double-income to a single-income family can be a difficult one, so think carefully about the childcare options available to you before resigning from full-time employment. The Covid-19 pandemic has forced many employers to re-imagine work-from-home options and more flexible work hours, so consider having discussions with your employer before leaving their employ. If you intend to return to work, expect to budget around R70 000 per year for daycare – whether in the form of creche or a full-time nanny.

Education funding

While we all know that tertiary education is expensive, the reality is that daycare, primary and secondary education can be just as expensive. With this in mind, you need to be prepared to finance your child’s education from the day they enter pre-primary school, which can be at around age 4. However, it is always a good idea to start saving for your child’s tertiary education keeping in mind that time is on your side.

Unit trusts are excellent for funding for your child’s future education and, using a minimum 18-year time horizon, you can afford to invest in growth assets such as equities and properties. Assuming you would like to put away enough money to pay for a four-year tertiary qualification at a cost of R70 000 per year, a rudimentary calculation shows that you would need to begin investing an amount of R840 per month from the time your baby is born into an investment strategy targeting annual returns of inflation plus 4%, and that these contributions would need to escalate annually at a rate of 6%. This strategy would provide you with sufficient capital after an 18-year period to fund the desired four-year qualification.

ADVISOR PROFILE

Gareth Collier

Crue Invest (Pty) Ltd

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