Manage money for your baby

AFTER saving for almost a year, Adam and Aida have finally saved enough for the down payment of their dream home, a freehold double-storey old house but very well-maintained.

What really attracted them was the close proximity to Adam's parents' home. Besides, there's also a hypermarket, a school, hospital, a playground and shops located nearby.

The owner originally asked for RM350,000 but after much negotiation and bargaining, they finally settled at RM325,000. They paid RM25,000 as down payment and took out a loan for RM300,000 for 30 years.

As Aida is working in a bank, she was able to arrange a staff loan facility at three per cent per annum, which works out to a monthly repayment of only RM1,300, instead of the initial budgeted amount of RM2,000. This was a huge saving.

With a home of their own comes along additional expenses, like utility bills, quit rent, property assessment, home insurance and occasional maintenance and repairs. Adam and Aida have now created a liability for themselves in the process of financing it through a home loan. In essence, they do not own the home until they finish paying off the loan. Meanwhile, it would be wise for them to cover that liability with an insurance programme should something unfortunate happen to either of them.
Most often, banks would recommend taking out a Mortgage Reducing Term Assurance (MRTA) which may be the most affordable option. However, we can also top up on our personal life insurance programme to cover for such liability. Adam and Aida decided to increase their personal insurance coverage by RM150,000 each as this would give them greater control and flexibility. Barring all this in mind, they felt it was necessary to come up with a new budget.

From their revised budget, they were still able to have a surplus.

Now that they have their own house, they felt it's time to start a family. All this while, they were unsure if they can afford to start one but after having reviewed their budget, they felt that they could manage.

Before you embark on your journey to parenthood, you might want to consider some of the following issues:

- Are you ready for the ride? Having children do not only involve financial adjustments but also emotional.

In fact, your whole life will change and once you decide to take this journey, there's no turning back. Many couples become parents by default or by accident (in some cases) but may not have taken a course in parenting or at the very least learn some basics of parenting via "on-the-job" learning or with some "mentoring" from their own parents. You have to get yourselves physically, mentally, emotionally and financially prepared for this parenthood adventure.

- What are your Childcare Plans? If you are planning to return to work, it is a good idea to make plans for your child well before he or she is born. Childcare centres often have long waiting lists. Consider your options: at-home care in your home, home-based childcare in another home, or traditional childcare centres.

Be sure to visit many places and get referrals from friends and families. When visiting a centre, talk to parents and, of course, find out the costs. However, if one of you is planning to stay home full-time to care for your child, there will be more adjustments to be made.

Yes, it may not be easy to survive on a single income for most urban families nowadays, but these are some of the sacrifices that you'd have to make. Decide on who's going to stay home and who's going to bring the money. This is a choice that only both of you, as a couple can make and know best.

- Review your monthly budget, or create one. Life will never be the same again and so will your budget. Having a baby will normally add to your monthly expenses.

For example, diapers and baby formula alone can cause quite a dent and you'll see increases in miscellaneous expenses too, such as napkins and laundry detergent.

Of course, one of the best ways to save on baby formula would be to breast-feed your child but it requires a lot of determination and sacrifice.

Other than that, your utility bills will likely to increase as you'll be home more often and have more laundry to wash. Medical expenses, including visits to the pediatrician, can really add up, especially over the baby's first few years.

And if you're planning to return to work, the cost of childcare can add several hundred ringgit a month to your expenses.

The key is to know how your money is being spent now and to plan for how things will change once the baby arrives.

- The most crucial thing to remember is financially, any expenses or future expenses can be managed with a budget that has been predetermined and the commitment to make necessary adjustments to your lifestyle when the need arises.

Can we afford a child now?

This question is often very subjective and rather personal. Couples should discuss and plan objectively to make necessary adjustments to their lives to welcome their new family member.