I’m thinking about having kids, what can I do to prepare financially?

Are you thinking about starting a family, but thinking ‘geez’ how am I going to afford this? Or are you worried about the mountain of costs involved? You’re not alone, and the last thing we’d want is for you to give up your hopes of having kids, because you don't think you can make it work financially.

We’ve teamed up with Crayon, a super helpful financial platform for parents, to share THREE steps to help you prepare for the future.

Step 1: Calculate the costs

Sure, prams, bassinets and car seats are expensive, but the biggest cost isn't the cute baby items, it’s the income you don’t earn because you’re taking time off work (aka taking parental leave).

So how much do you need? Good question! To help answer this question, first ask yourself:

• How much time do you ideally want to spend with your baby?
• If you have a partner and you’re ready to talk about this together, how much time do they ideally want to spend with the baby?
• How much does it cost to run your life per month?
• Once these questions are discussed and you realise how much you need, add about $8,000 on top of that for extra baby costs. Yep, that’s the average cost of raising a child in their first year (IRD Research Paper).

Don’t worry about calculating it down to the last dollar, a ballpark figure will be just as helpful because things will likely change between now and your baby’s arrival. However, the more prepared you can be financially, the less stressful those little unexpected surprises will be!

Step 2: Work out what you’ll get from the government and your employer

A lot of expecting parents don’t realise what you can (and can’t) get from the Government as a helping hand. In New Zealand, the government offers:

• Primary Carers (typically the birthing parent): income replacement up to $712.17 per week before tax for 26 weeks, then $69/week until your child turns one, totalling a maximum of $20,310 for the year (this amount is current as at 1 July 2023)
• Partners: up to two weeks of unpaid leave
• There are quite a few eligibility requirements though, so make sure you get familiar with these using Crayon’s New Zealand Parental Leave Entitlements Estimator.

Next, see if you’re eligible for Working For Families tax credits. Further Government assistance may be available to you depending on your family income.

Lastly, have a chat with your employer. Some employers might offer something above the Government amount. How do you figure this out? You can use The Curve’s Anonymous Parental Leave Survey.

Step 3: Work out how much you need to save

Chances are, there’ll be a gap between what you need money-wise and what you’ll receive while on parental leave.

Use The Curve’s Calculator to determine how much you need to save each month. Even if you decide not to have kids, you can repurpose your baby fund for other goals, such as investing, travelling, or even starting your own side hustle.

Other helpful tips to increase savings are firstly - try living off one income (if you’re a couple) or a reduced income - even just for a couple of weeks. It’s a good way to test what it’ll be like on parental leave. You can use the extra money you save to kick-start your baby fund!

Another way to ramp up your savings - especially if things are tight right now and you still have time to plan - is to commit to stashing future pay rises into your baby fund. This technique, pioneered by a Nobel laureate, has been proven to work.

One last pro tip: check out the common curveballs to avoid the financial surprises that catch new parents off-guard. It might feel daunting, but the sooner you start chipping away at this - even if it’s just a small amount each week - the more confident and prepared you’ll be to start your family journey.