Planning for baby

Going from two salaries to one and the costs of baby items can be daunting, but you can keep within budget.
 
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01 .Introduction

Family budgeting

Use our planning for baby guide to find out what you really need and ways to stay within your budget with our interactive budget tool.

In this article, you'll find information about:

You can also take a look at our shopping tips, and real advice from other mums.

For more information about Education and childcare, please take a look at our Fact sheets.

How to get your finances on track

Make a budget to identify potential savings. Work out where your money goes by keeping a log for a month, write down, or better insert in a spreadsheet, each expense and what it’s for (including any automatic deductions from your credit or savings accounts). 

Divide expenses into:

  • Fixed expenses such as insurance, home loan or rent payments
  • Other essential costs that vary from month to month such as petrol, phone bill or grocery expenses
  • Variable items such as going to a nice restaurant or theatre tickets

Once you know where your money goes you can look at each cost and see if you could make a saving. For example, going to a less expensive restaurant or making sure you get petrol on the cheapest day of the week.

Direct your savings into a fund for baby costs that you can draw on for all your extra expenses. If you have a mortgage with a redraw facility, consider using it to store some funds. 

Otherwise, use a high-interest online savings account. Ideally start a direct debit from your transaction account to the baby account. You could even try to live on one salary and pay the second one into your savings.

Credit card

Use the time you prepare for your baby to pay off your credit card. But first make sure you have the right card for your needs:

You can make big savings by using the right card. Consider, for example, the difference in interest you’ll pay with a rate of 9.85%, compared with 16.25%: if you make the minimum repayment plus $50 extra a month to clear a debt of $2500 you’ll save close to $300 in interest with the lower interest card.

Every dollar extra of repayments makes a difference and saves you interest, if you only pay the minimum you may never pay it off. See the table below for how much you can save.

How to repay a $1000 credit card debt*
  Time to repay (months) Total amount repaid ($)
Minimum repayment only  239  3034
Minimum repayment plus $50  19  1148
Minimum repayment plus $200  5  1045
* Repayments calculated for a credit card with 18.25% interest rate and $40 annual fee. Minimum repayments are 2% or $10, whichever is higher. These calculations assume all fees are paid plus the regular amounts shown.
Source: CANSTAR Cannex

Home loan

Repayment holidays

Many home loans offer a repayment holiday for six or 12 months while you’re on parental leave. During this time you can make lower or no repayments on your home loan. Ask your lender if you have this option. Conditions usually apply: you may have to make repayments of at least 50% of your salary, have a job to return to after your parental leave and have already held your home loan for a period such as 12 months and repaid part of it (for example you may not be able to owe more than 90% of the value of your home).

Trap interest is added to the loan during this period. It makes sense to repay your home loan as quickly as possible as the quicker you repay it the less interest you pay.

Fixed rates

If you’re pregnant, it may also be a good time to think about fixing the interest rate for all or part of your home loan. A fixed rate gives you security and allows you to budget. 

Trap you may end up paying a higher rate than variable rate borrowers, especially if you lock in rates when they are at their peak. 

Education savings

Saving to pay for your baby’s education is similar to any other long-term savings goal. It can be as simple as putting a few dollars a week into a high-interest savings account or as complex as developing a portfolio of shares.

What to save for

  • Education and extracurricular activities can be expensive. You're likely to need to pay for school fees, uniforms, excursions, books, transport, lunches, musical instruments, tuition, internet access and home computers.
  • Tertiary costs can include accommodation, transport, clothing, groceries and, of course, university or TAFE fees.
  • There’s no way of calculating exactly how much it costs to educate a child. It will depend mainly on the type of schools they attend. Figures can exceed more than $15,000 per year (in current dollars) for a 13 to 18 year old.

Your options

  • Investing in a high-interest savings account, shares or managed funds is one option for saving for your child's education. Generally, it's not the most tax-effective strategy, but may offer flexibility and investment choice.
  • Education-specific managed investments are tax effective. Carefully read each company’s product disclosure statement before investing and check if they’re flexible enough for your needs. For example, what happens if your child decides not to take up tertiary studies? Can you get the money out?
  • Paying back the mortgage to 'save' for your children's education can be an excellent strategy. It's tax effective and available to pretty much all home owners. But you need to be very disciplined, stick to your savings plan and make sure you don’t use the money for other things.
 
 

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02.Paid parental leave and baby bonus

 
The Paid Parental Leave (PPL) scheme is an entitlement for working parents of children born or adopted from 1 January 2011. Parents get up to 18 weeks of government-funded PPL at the rate of the National Minimum Wage ($622.10 a week before tax at 1 July 2013).

In contrast to the Baby Bonus, which is tax-free, PPL is considered taxable income and has bearing on Family Assistance and Social Security payments.

To be eligible for PPL you can’t be working during the time it is paid and must have had a personal income of no more than $150,000 in the financial year before your baby is born. You must also have worked for at least 10 of the 13 months prior to the birth or adoption of your child, and worked for at least 330 hours in that 10-month period (just over one day a week) with no more than an eight-week gap between two consecutive working days.

Baby Bonus

If you’re not eligible for PPL, you can receive the Baby Bonus that’s paid to families after the birth or adoption of a baby. You can also choose to receive the Baby Bonus instead of PPL. The Baby Bonus is not considered taxable income and therefore has no bearing on Family Assistance or Social Security payments. 

If your child was born or adopted before 1 July 2013, the Baby Bonus to which you’re entitled is $5000. If your child was born or adopted on or after 1 July 2013 (or you became eligible for Baby Bonus on or after 1 July 2013), the bonus is either $5000 or $3000 depending on your situation.

From 1 March 2014, the government will increase Family Tax Benefit Part A (FTB Part A) payments by $2000, to be paid in the year following the birth or adoption of a first child or each child in multiple births, and $1000 for second or subsequent children. The additional FTB Part A will be paid as an initial payment of $500, with the remainder to be paid in seven fortnightly instalments.

To be eligible for the Baby Bonus, your family can only earn up to $75,000 (adjusted taxable income) in the six months following your baby’s birth or adoption. You must lodge a claim for the Baby Bonus in the 52 weeks following your baby’s birth.

The Coalition's Paid Parental Leave policy

Under the new Abbott government’s scheme, mothers will receive their normal salary (up to $75,000 - that is, half of their annual salary as long as it is $150,000 per annum or lower) for 26 weeks, plus super. Fathers can take two out of the 26 weeks at their actual salary, plus super. The scheme is supposed to start from 1 July 2015, but is yet to pass both Houses of Parliament.

Health insurance

One of the first things you should do when you’re planning a family is review your health insurance; it’s best do this before you’re pregnant as waiting times of 9 to 12 months apply until you would be covered for a full-term birth:

  • If you don’t have private hospital insurance, check our report to choose your cover.
  • If you already have private hospital insurance:
    • Talk to your fund and find out your level of cover for obstetrics. Can you go to a private hospital? Can you go to a public hospital as a private patient?
    • Review your excess and co-payments and consider upgrading to a policy without an excess. However, keep in mind the 12-month waiting period for pre-existing conditions that applies if you upgrade to a higher level of cover, even if you stay with the same fund.
    • Check with your fund how soon you need to upgrade to family cover (couple and family cover is usually the same price so it won’t cost you more) to make sure that your baby is covered.

If you receive treatment as a private patient, your private hospital insurance will not always cover the full cost. You may be charged a gap: the difference between the hospital and/or doctor’s bill after you receive your Medicare and health fund benefits. How to minimise gap costs:

  • Ask your doctor if he/she has gap cover arrangements with your fund and if you will have to pay any out-of-pocket costs. Get this information in writing.
  • Ask your doctor if you will be billed by other doctors who may treat you, such as an anesthetist or surgeon’s assistant, and how you can get an estimate of their fees.
  • Ask the hospital if it has a current agreement with your fund and if there will be any out-of-pocket costs.
  • Confirm any information you get from the hospital and doctor with your fund.

Life, income protection and disability insurance

Review your life, income protection and disability insurance to make sure you and your dependants are covered if something unexpected happens.

  • Life insurance covers your dependants if you die. As a rule of thumb, the sum insured should be 10 times your salary. However, you may need more depending on your individual circumstances – consider how much you owe, how many children you have and their age. You’ll also need cover if you have a loan such as a home or personal loan. Your premium depends on your age and the amount of cover you need. For example, for a 30 year-old male (non-smoker) office worker a $1 million life insurance policy could cost on average about $380 per year (with your industry super fund) or $580 per year (as a standalone policy through your financial adviser).
  • Income protection insurance pays up to 75% of your salary if you cannot work because of illness. Premiums vary depending on your risk factors, the waiting period until the benefit kicks in and the duration of cover, which ranges from two years up to age 65. For example, an income protection insurance policy with a 30 day waiting period for a 30 year old male (non-smoker) office worker with a benefit of $6259 per month (75% of a $100,000 salary) for a period of two years could cost on average about $275 per year (with your industry super fund) or $465 per year (as a standalone policy through your financial adviser). Premiums for income protection insurance are tax deductible.
  • Trauma insurance If you’re not employed because you’re looking after children, you usually can’t take out income protection insurance. Consider trauma insurance instead, which pays a lump sum in case you suffer one of a number of conditions, such as cancer, stroke or heart disease.
  • Total and permanent disability insurance pays a lump sum if you become permanently disabled because of an accident or an illness such as a stroke. You can be insured against either not being able to do your specific type of work or any work generally.

Essentials

  • Cot 
  • Pram or stroller 
  • Child car restraint 
  • Nappies— a packet of small-size disposables to get you started; or three dozen cloth nappies.
  • Bucket with a secure lid. Two buckets if you’re using cloth nappies; one if you’re using disposables
  • Six to eight singlets, size 000
  • Six to eight all-in-ones (jumpsuits) and/or nighties, size 000 - you may need some in size 0000 for the first few weeks.
  • Two long-sleeved tops or jackets for cool days
  • Soft sunhat for summer, warm hat for winter
  • Two pairs small socks
  • Bibs
  • Bottles and teats; bottle brush; and sterilising equipment. You’ll need six bottles if you’re bottle feeding, while breastfed babies might need a bottle or two for water or expressed milk
  • Bedding as appropriate (sheets, blankets and mattress protector)
  • Three or more bunny rugs or muslin wraps
  • Soft towel and face washer; baby soap or wash; cottonwool balls; sorbolene and glycerine cream (for cleaning and moisturising); soft hairbrush; round-tipped nail scissors
  • Thermometer

Useful

  • Baby carrier
  • Baby bath
  • Baby sleeping bag
  • Change table (for more information see change tables review and compare
  • Highchair (after about 5 months—for more information see high chairs review and compare)
  • Bouncer or rocker
  • Breast pump
  • Breast pads—four pairs of reusable pads or one pack of disposables
  • Baby bag for outings
  • Safety equipment such as gates, child-resistant locks and catches, stove guard and door knob covers
  • Cottonwool squares or wipes; baby wipes; zinc-based cream (for preventing and treating nappy rash); petroleum jelly

Optional

  • Bassinet or cradle for first few months
  • Baby monitor
  • Portable cot (for more information see portable cots review and compare)
  • Portable highchair
  • Day clothes—a special outfit or two for when baby’s on display — although you’ll probably get some as presents
  • Playpen (for more information see playpens review and compare)
  • Toys and other amusements
  • Dummy
  • Olive oil for massage or moisturising

Not recommended

  • Baby walkers
  • Cot bumpers
  • Quilts, doonas, duvets and pillows are not recommended for the first year
  • U-shaped pillows are not recommended for the first two years
  • Baby fruit juices and snacks

For the first four years of your baby’s life you could spent on average over $20,000 on baby purchases with the bulk of the cost in the first 12 months.

Average spent per year for the first four years:

  • Furniture — $539 
  • Clothing — $1,564 
  • Nappies — $1,381 
  • Footwear — $35 
  • Nutrition & Food — $863 
  • Toys — $378 
  • Other — $534 
  • Total — $5,393 

Source: IBISWorld 2009

Shopping tips

  • Wait and see what you need: It’s wise to buy a few essentials and then spend carefully as the need arises.
  • Make a wish list for friends and relatives: Try to think ahead so you will know what you need when someone asks what to give you for a present.
  • Avoid buying expensive things your baby will soon outgrow such as size 0000 clothes or a bassinet.
  • Don’t underestimate the value of easy care, ideally you want to be able to throw the item in the washing machine and perhaps the dryer.
  • Think about renting or borrowing some items – for example, many libraries offer toys and children’s books and some councils and community organisations provide baby car capsules for hire.
  • Shop around: the telephone and internet are convenient for comparison shopping as long as you know the brand and model names of the products you’re looking for. Variety stores have regular sales, so with a bit of planning you can take advantage of them to save money.

Buying second hand

There can be some risks in using secondhand goods for children. For example, they might not be safe, or might be worn or damaged and therefore dangerous.

There are some products you shouldn’t buy second hand, for example car restraints that you can’t be sure they have not been in an accident. With other products such as cots make sure they meet current safety standards.

However, you can save a lot of money on other items such as children’s clothes which might have had very little wear.

eBay

Ebay (www.ebay.com.au) is an online treasure trove of used and new baby products up for auction.

  • Just because it’s listed on eBay doesn’t mean it’s a bargain. Before you decide on your highest bid, check how much the item retails for on the internet or in shops.
  • Check the postage price as it can vary greatly.
  • Check that the available payment methods suit you.
  • Each seller has a feedback rating made up of comments and ratings from other eBay members who’ve bought from them. A high feedback score can be a good sign of a reputable dealer, but take the number of transactions into account as well.
  • Some sellers list items in US dollars or British pounds, even on the Australian eBay site. Double-check the currency. Many websites, such as www.xe.com provide daily exchange rates.
  • You can’t usually inspect goods for sale on eBay before buying. So, look for items with several clear photos so you can see the item at different angles, and the item’s description should indicate its condition. If in doubt, contact the seller before you bid and ask about the item’s age and condition.

Mail-order

Australians spend millions of dollars each year on mail-order products and services. The Australian Direct Marketing Association (ADMA) has a set of rules which forms the code of practice for its members. If the company is not an ADMA member the rules don’t apply.

  • If goods ordered don’t arrive in the specified time, under ADMA rules you have the option of continuing with the purchase or cancelling it and getting a refund.
  • If the goods never arrive, an ADMA member must trace or replace the missing goods, or refund your money.
  • If the goods are damaged in transit an ADMA member must pay to replace them, including postal charges you incurred when returning them.
  • Australia Post will compensate you if it appears the damage was its fault.
  • If you want to cancel the order, you can do this only before it’s reached the merchant.
  • Never send cash through the mail. If you pay by personal cheque or credit card you’ll have a record of whether (and when) the company received your order and payment, which is preferable to using money orders or bank cheques. If you use a credit card the bank will refund you if the merchant fails to provide goods or services (time limits apply).
  • If the merchant goes broke before filling your order, you become an unsecured creditor and have probably lost your money (using a credit card may provide you with some recourse).
  • Standards vary internationally, so a product deemed safe in one country may not meet Australian safety standards.
  • Check the wording in the advertisements carefully, taking note of ‘inspection without obligation’ periods, and check the goods thoroughly before using them.

Internet

  • As with mail order, a product deemed safe in one country may not be acceptable here.
  • If there’s something wrong with a product, you may find it’s not clear which country’s consumer protection laws will apply—ours or theirs. This can present a problem with returns, refunds or even enforcing warranty repairs. Ask the vendor for this information before you buy.
  • Shipping costs can add dramatically to the price of a product.
  • Remember that exchange rates vary, so check what rate you will be charged by both the vendor and your credit, charge or debit card.
  • Send an email to the vendor before you order to check its returns policy and whether the product you want is in stock.
  • Check the site is secure: look for the key or padlock symbol you can find in your browser’s URL or address bar. A broken key or padlock signifies an unsecured site while a solid key or padlock indicates that the data will be encrypted.
  • Make sure you get written confirmation of your order, or print out and keep a copy of your order and receipt from the internet.

We asked our Facebook followers for tips for new mums, here’s a selection:

Crying

  • Babies cry for a reason, they need something so they let you know, a full tummy and a dry bum and a cuddle is all they need, unless they are sick of course, or have wind, just enjoy every minute, don't worry about the housework, and always except help when its offered, you will need it!!

Feeding

  • Learn about breastfeeding before baby is born - and find out where to get really good bf support. Don't buy everything on "the list" until you know you really need it - after baby is born. A safe sleeping area, some nappies and a few clothes are all baby needs at first.
  • If breastfeeding isn't going so well ring the Australian Breastfeeding Association breastfeeding hotline 1800mum2mum or even hire a private lactation consultant to come visit you at home if you can't get in to see one in your local public hospital urgently. It may seem expensive but is nothing in comparison to the ongoing cost of formula and benefits to you and baby.

Sleeping

  • Never wake a sleeping baby. If a baby falls asleep in your arms, use the arm-drop test to see if you can put them into bed without hem waking: if you can raise and drop their arm without them flinching, you can put them down. Fill your freezer with frozen dinners before the baby comes.
  • Don't get them used to having everything quiet in order for them to take a nap. If they're used to misc. noises, they can sleep while life goes on around them.
  • ALWAYS sleep when baby sleeps! It's the only time you'll get any!

Baby products and toys

  • They are all different. Some gadgets that worked for one won't necessarily work for the other. It's all guess work!!
  • You don't need a nursery full of baby gizmos. Many existing household items will do the job of expensive "baby specific" products. Ask your mother or grandmother what are essential items.
  • Baby #1: Buy everything you think you might need (and really, don't be afraid to consider second hand items - remember, you'll only need some things for a year or so - babies grow up so quickly). Baby #2 inherits everything from Baby #1. The only things I'd recommend buying are a second car seat, a new bed for Baby #1 and a king size bed for yourselves, because there will be mornings when you wake up with 4 in the bed.
  • Prepare a baby first aid kit. Thermometer, gripe water, panadol, emergency contacts/support . It may be the middle of the night when you first need some of this stuff.

Family and friends

  • A good friend coined the phrase "sure come over and see the baby, you can stay fifteen minutes and bring food" really good tip! That and have on hand lots of what we call protective clothing ie washable nappies to catch vommies!
  • Get visitors to help in practical ways -- doing a quick vacuum, stacking the dishwasher -- good friends will be glad to do it and it will be a great relief to have the help.
  • Pay it forward! When friends have had a baby, go over and take them a cooked meal, a box of fresh fruit and veg etc for them to enjoy later! Leave the cakes and crap at home! Then when it's your turn, they'll do the same for you! I didn't cook for a week! It was heaven!

Miscellaneous

  • Take each day as it comes - each day will be different! Don't be too hard on yourself. Be flexible.
  • Try to ignore people who say things like "enjoy every moment". Their rose-coloured glasses will not help you. It's not always fun, and there will be times when you could lose it completely. Instead of making yourself feel guilty because you aren't "enjoying every second", make an effort to recognise and enjoy those few moments each day when you *are* enjoying your baby (or toddler, or child, or teenager, for that matter). Those moments when the world seems to stop: when they smile because they see you, or you see the light shine on their hair, which is suddenly so much longer than it used to be, or they lift up their arms because they want a cuddle, etc. Whatever it is, stop and appreciate *that* moment.
  • I wish I knew how much time feeding/changing/settling took i.e. the best part of a whole day. It's very hard to get anything else done. Also, I now know that you don’t need quite as many lotions and potions as are available. I have some which I'm sure ill never use.

Pregnancy and birth

  • Gentle Birth, Gentle Mothering by Sarah Buckley
  • Up the Duff by Kaz Cooke
  • The New Pregnancy & Childbirth by Shiela Kitzinger
  • What to Expect When You’re Expecting by Heidi Murkoff 
  • Conception, Pregnancy and Birth by Dr Miriam Stoppard
  • Attack of the 50 foot hormones by Emma Tom

Baby care

  • Baby Love by Robin Barker
  • Baby on Board by Howard Chilton
  • How to Stay Sane in Your Baby’s First Year: The Tresillian Guide by Catherine Fowler and Patricia Gornall
  • The New Contented Little Baby Book by Gina Ford
  • Save our Sleep by Tizzie Hall
  • Sleeping Like a Baby by Pinky McKay
  • The Wonder Weeks by Hetty van de Rijt and Frans Plooij
  • First-time parents by Dr Miriam Stoppard

Caring for older babies and toddlers

  • The Mighty Toddler by Robin Barker
  • The Complete Secrets of Happy Children by Steve Biddulph and Sharon Biddulph
  • Kid-Wrangling by Kaz Cooke
  • Parenting for a Peaceful World by  Robin Grille
  • Todler Tactics by Pinky McKay
  • Baby-led Weaning: Helping Your Baby to Love Good Food by Gill Rapley and Tracey Murkett

First aid and safety

  • First Aid for Babies and Children Fast, in association with St John Ambulance

Online resources and forums

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