Saturday, 1 March 2008

How will my financials change when No.2 arrives?

Preparation for your first child is not a task to be take lightly. Amount the physical needs of the child, their emotional needs as well as their financial needs must be catered for.

Is the preparation for the second or the third child any different from the first child? Trent at the The Simple Dollar has some nice advice on how to prepare for the second arrival in a frugal manner.

For one thing, the on-going family expenses will be increasing. Therefore, planning on to the deal the change is key. Apart from the obvious items such as the medical bills, clothing etc, it is worthwhile to investigate the other part of your life that will need to be change and how much that will cost to change it.
  1. If your car is not of the right size, you may need a purchase a larger car. It is also true that the current house you are in may not be larger house enough.
  2. One of the parents being a full-time home maker. This will affect the household income. Being a full time home maker is a very personal decision, but sometimes the key reason may be due to financial reasoning. EG, unable to afford to put that many child in child care.
  3. The work hours of the bread winner may have to be reduced to give more support to the full time home maker.
  4. Increase in your life or income protection insurance, this usually means an increase in the insurance premiums. I believe that this particularly important as the number of family members has increased and the new addition's welfare must be looked after.
  5. Ensure that your emergency fund is changed to ensure that it covers the new arrivals.

Photo credit: Joe Zlomek
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traineeinvestor said...

We ended up having to buy a bigger apartment to accomodate our second child. The deposit, fit out, stamp duty etc on the new place was far more than we expect to spend on the child's education for life.

Thankfully, HK property prices have appreciated since then so it ended up being a good move financially.

Mr. Debtbeater said...

Well, with 6 kids I can tell you that there's not enough planning in the world for some things. ;)

Good list you have though. We've had to accommodate a lot of things that you mentioned to manage a large family. We still drive 2 vehicles when (seldom) needed to avoid the new car payment, the wife stays home, I work 50hrs/wk (but their flexible!), and we've doubled our initial emergency fund to $2000 just because our emergencies typically happen more often with all the chaos. LOL

Oh the joys of new additions!

tehnyit said...

@traineeinvestor, living in HK would also put a strain on the finances as well, with HK's cost living at a record high.

@mr debtbeater, flexible hours are great! I wish that all parents have such opportunities as we have with our work hours!