How to Prepare your Finances for Starting a Family

1.  Before Planning a Child

• Have your personal insurance in place
  Insurance is one of the most important financial planning needs, and is critical for mitigating the impact of unforeseen future events. Personal insurance encompasses life, total and permanent disability insurance plans. While an individual doesn’t need to have them all, you’ll need a combination that works best for your family.
  
  
• Get your health insurance sorted
  Pregnancy takes a toll on both individuals. So before you decide to start a family, it is time to dig deeper into your health insurance plans to understand what they cover and what they don’t. In case there is something critical missing in your current coverage, look for an additional policy – but make sure you start soon, as there is often a waiting time involved before you can claim.
  
  
• Discuss the financial aspects with your partner
  When you are planning to start a family, it is imperative that both parents are on the same page regarding the financial repercussions involved. Talk about retirement contributions, the expected expenses involved in raising a child, and the elements that you need to cut back or increase from the existing budget. In addition, discuss the kind of childcare arrangements, schooling preferences and financial aspects of raising a child, such as the need for investing in ELSS funds, hybrid funds or gilt funds.

2.  When The Child’s Birth Is A Few Months away

• Discuss upfront and recurring expenses
  Starting a family brings with it a host of upfront and recurring expenses. From the costs of visiting the doctor and conducting tests, to maternity clothing and food needs, there are many aspects that parents need to bear in mind. Make sure that you are both clear about all these expenses from the outset when you are starting your family. Investing in liquid mutual fund via a lump sum or SIP several months before birth can act as a buffer for your imminent financial needs.
  
  
• Have your emergency funds in place
  While it is imperative for an individual to begin building an emergency fund as soon as they start earning, it is especially crucial if you're starting a family. Calculate how much you would need in your emergency fund and build up to the amount by investing in liquid or overnight funds via SIP plans.

• Check if there are any workplace or government benefits available to you
  Attitudes to childcare are changing in corporate India, and this is reflected in supportive policies for new parents. The government, too, provides financial and non-financial aid to individuals starting a family. See if there are such schemes or perks available to you. For example, the Central government has started the Sukanya Samriddhi Yojana (SSY), a deposit scheme for girl children.

• Build an investment fund for them
  Many think you should have a savings account for a child, but this offers low returns and is vulnerable to inflation. Instead, look into the types of mutual funds and start SIP plans to build an investment fund for them. If you are a risk-averse investor, you can choose debt mutual funds. You can also go for a SIP plan in hybrid mutual funds or equity mutual funds for optimised returns.
  
  
• Plan for the child’s education expenses
  Education expenses take up a majority of all the costs in raising a child, so plan and invest in your child’s education. Since the child’s education expenses are a few years away, look for equity mutual funds to invest in for the long term. There are several child education plans that can help you do it systematically. Mutual fund investments have the potential to provide steady returns over time to cover recurring education expenses.
  
  
• Do not ignore your retirement funds
  We understand that having a child can be overwhelming, not only emotionally but also for your finances. You want to pour all your resources into the child’s welfare – but don’t forget to look out for yourself too. Find out if your workplace will continue to fund your retirement plan until you get back to the office. If not, you can look for supplementary retirement plans or pension plans to help you keep your retirement plans on track.