Set right finances before baby is born

The birth of your child would be a joyous moment for your family. What would make it even more joyful is not having to worry about money during this time. Having a financial plan for this joyous but challenging period in your life would make it easier for you to sail through. Here are some thoughts to explore as you plan your baby.

Check with tour HR
If you are employed, check with your employer about maternity and paternity benefits. As per law, expectant mothers are entitled to 26 weeks of paid leave. Some companies may also have paternity leave. Apart from these, employers may offer other benefits as per their policies. Make sure you know what you stand to gain. This will help you make useful savings.

Check insurance coverage, upgrade life cover
Maternity-related health care costs can be covered by some health insurance policies. You can check both your employer-provided insurance plan as well as the one you may have bought personally. The policies will define how much of your maternity expenses can be covered. Often, plans may have waiting periods (often, 3-4 years) after which claims for maternity can be made. If you have married recently but plan to have a child after a few years, you can buy such a plan now and complete the waiting period. Similarly, if your baby is already on the way, you can consider upgrading your life insurance cover. With multiple members of your family dependent on your income, you should consider a term plan to provide them the best possible protection for the long term.

Prepare the baby budget
To enjoy the arrival of a new family member better, make sure you have prepared financially for it. Ideally, you should start preparing a baby budget sometime soon after your marriage. You can identify an amount that you think you would need to manage your expenses with the arrival of your baby. This amount should be locked in a safe instrument such as a fixed deposit. It should not be used for any other purpose.

Clear expensive debt
You don’t want to enter a challenging period in your life saddled with debts. As you prepare for childbirth, it would be advisable to settle any minor but expensive forms of debt such as credit card balances. This is especially important for working women who do part-time or freelance work, as their incomes could be impacted during these mon-ths. The repayment would bo-ost your credit history. And with a clean slate, you will be in better position to take further credit if needed.

Take stock of emergency fund
Given the challenges around childbirth, it would be advisable to be prepared for any emergencies — such as a sudden loss of employment. Emergencies could arrive at any moment. Therefore, always maintain an emergency fund, which could be at least three to six months of your current monthly income locked in a fixed deposit. This is your money to liquidate only when you face tough times. It should help you cover such fixed expenses as rent, EMIs, utilities, supplies, insurance premiums, school fees, etc.

Miscellaneous fund is a must
Not many parents may consider this fund important. But there will be plenty of unplanned expenses with the arrival of the baby — right from having to buy some extra diapers to paying for a nanny. A moderate sized miscellaneous fund could help cover some of these expenses.

(The writer is CEO of BankBazaar.com)