There is nothing more exciting than a new baby on the way, but it does bring with it a few daunting cost considerations. You’re shifted from being a young independent, to being someone who needs to all of a sudden, watch what they spend.
Lezanne Human, CEO of FNB Savings, Investments and Fiduciary, says “Making the transition to being a new parent can be very intimidating, especially when considering the effect it will have on your finances. A new addition to the family brings with it expected and unexpected expenses; ensure that you save for both. The sooner you start, the sooner you can take advantage of compound interest.”
Here are a few pointers every young family should consider to make this journey even more joyous:
1. Plan ahead
When thinking of starting a family or planning for another child, you need to take into account all the different expenses that may come your way. It starts with finding out a little bundle of joy is coming, regular doctor visits, getting the baby’s room ready, the day you bring your little one home until the day they move into their own place. You need to plan for the things you have to save towards and if you start saving early for better growth.
2. The magic of compounding
The advantage compound interest is that the earlier you start the better, because it gives you timeto build up your capital. Instead of trying to beat the market, you can use the compounding effect to your advantage. Compounding means that you earn interest on interest, so the longer you invest for, the greater your returns.
3. Consider the affect of inflation
The cost of living is rising and you need to be sure that you keep up with this cost, especially school fee increases that usually exceed inflation. Save accordingly today, so that you can cover all relevant costs now and in the future.
4. Automate your savings
Set up a Scheduled Transfer with FNB into your savings or investment account, this will make it easier for you to start saving from the moment you get the good news. This means that the money is automatically saved into a bank account on a regular basis. This also means that you can save regularly instead of having to commit a large lump sum up front.
5. Don’t compromise
Before starting a family it’s important to plan your finances and get them in order to ensure you balance your child’s future expenses with other financial obligations. Paying off debt and saving for retirement must remain top-of-mind while saving for your little one and should form part of your family’s holistic financial plan. If in doubt, contact an expert to assist you in ensuring your financial objectives are met.
6. Encourage your children to save
Make sure you teach your children the importance of saving from a young age. FNB offers a MyFirstSavings account which parents can use to teach and encourage their children to save. This account is designed specifically for children, aged between 0 – 16 years. With a MyFirstSavings account your child can add money, like pocket money and gifts at anytime and they can withdraw up to 25% of their money with 24 hours’ notice each month, if they want to buy something quickly. They can also access 100% of their money after 5 days’ notice if they want to buy something big they’ve saved up for.