Ease the financial and psychological pressure of starting a family
When you have young children your lifestyle can take a real hit.
You’re sleep deprived, financially stretched and working harder than you ever have before in your career and at home. And to make matters worse the upholstery of that nice new family car you bought is mysteriously smeared in sultanas.
Face it, your life as you knew it before kids has taken a 180 degree turn.
But don’t despair, wipe the toddler grot off your shoulder and read on.
The real cost of having children
Nothing creates stress like money and family. In fact, a 2014 survey found the two leading causes of stress amongst Australians were financial and family issues - women put family first, while for men it was personal finance issues.
The cost of bringing up a child has risen exponentially in recent years. Reports from 2013 show that the typical middle-income Australian family spends $812,000 raising two kids from birth to the time they leave home. Perhaps alarmingly, the same report also says that for middle income families the cost of raising kids has risen by around 50% since 2007. That’s twice the amount household incomes have increased, which have only risen by 25% over the same period.
But the real costs of raising kids may not be what you first imagine. While it might be childcare that’s eating into your pocket right this minute, it’s actually not one of the biggest long-term costs.
Over their child’s life, middle-income families will spend the most on transporting their children and feeding them. This is followed by recreation (those dance lessons and football clinics add up) and housing - or the cost of needing a bigger home. Combine these with incidental costs, and then things like childcare, furniture and equipment, clothing, education, health, services, and even fuel and power and you can see how there’s little financial respite even as your child gets older.
Despite this, it’s when a family is young that we often feel the financial pressure most acutely: not just because of the profound lifestyle change but also because one parent is often working fewer hours than they used to. So you’ve got even less money coming in to pay for it all.
But there are ways to ease the pressure.
Get on top of your finances
It’s hard to negotiate all of this without a good household budget, but it has to be realistic. Start by tracking your expenses so you know what’s leaving your wallet right now. It might surprise you.
A good bank account like the Macquarie Transaction account automatically categorises your spending so that you see exactly where your money goes. It also lets you set limits on how much you want to spend each month on any category.
Once you know where your money’s going it should be obvious where you can make savings without feeling too much pain.
A budget doesn’t have to mean no lifestyle at all. For example, there’s a good reason meal plans, specials, bulk buys and cheap supermarkets are popular with families - they can save you serious money over time when you’re feeding a crowd. As can buying - or selling - second hand goods, or doing a house swap holiday.
Reduce home loan stress
One of the biggest stresses on young families is either saving for a home loan, or meeting mortgage repayments.
“Mortgage stress” kicks in when we spend more than 30% of our gross income on servicing a home loan.
If you find yourself in this boat there are several things you can do:
- going “interest only” until you’re both back working full-time. Although this should be used cautiously as it will add time to your loan, lead to you paying more interest and building less equity.
- fixing your interest rate on all or part of your loan so that you know how much you’ll be paying each month
- refinancing your home loan at a better rate or over a longer timeframe to bring down the amount you’re paying each month. Again, as with going interest only this will add time to your home loan and you’ll build equity less quickly.
- packaging your banking products to get a reduction in fees, more flexibility or a better interest rate.
In case the worst happens, you should also make sure you have mortgage insurance to meet the cost of repayments if you lose your job or get sick and can’t work.
It's vital that you enjoy life and have some degree of normalcy. Save for a much needed holiday–and take time off to enjoy your family.
Transport is a big cost for young families but also a necessity. With a growing family going in different directions each morning it might not be possible to save by getting rid of that second car. But if you’re in a big city and you don’t have to drive different ways every day, a car share programme like GoGet or Care Next Door may be a more economical solution.
And, given the price of fuel price goes some way to determining your transport costs, an app like MotorMouth, which shows you the price of fuel at all nearby petrol stations, can be valuable too.
You can make significant savings by comparing the market and renegotiating any insurance policies. The same goes for internet, pay TV or mobile phone packages, as well as gas and electricity bills. A regular audit not only tells you how much you’re paying, but gives you a chance to get a better deal on most bills.
When it comes to entertainment it can help to change your mindset about what’s necessary too: walks to the park, reading a book at the library, catching public transport, or playdates with friends can all keep a child amused for hours, and none are likely to cause a dent in your budget at all (so long as you return those library books on time).
Consider childcare jointly
Childcare and early education costs can feel astronomical - whether it’s daycare, preschool, before and after school care, school fees, extra tutoring, sports lessons, a nanny or a babysitter.
Childcare can be a huge chunk out of your income - particularly if you work part-time. But if you combine your finances and see childcare as a joint cost - just like your home loan, insurance or groceries - the maths will become a little easier to justify and less of a burden on those in part-time work.
Investigate which government childcare benefits you’re entitled to. And also look at the different types of care available. For instance, while dedicated preschools are cheaper than long day care centres, the hours are shorter and the childcare rebates may not apply.
You may also be able to reduce your childcare costs through salary sacrificing or salary packaging. This involves your employer deducting them from your pre-tax salary, meaning you lower your taxable income.
Ease the psychological stress
Having a family is joyous, but brings its own emotional stresses. So it’s crucial to recognise signs of stress in yourself, or your partner, and to take time out to relax. To help keep your stress levels in check experts recommend you should:
- avoid overcommitting yourself, whether that’s financially, socially or at work
- recognise that parenting is a full time, round-the-clock job and you won’t always get it right - there is no rule book
- maintain your social connections and take time for your relationships by scheduling events like date nights
- take time out for yourself to enjoy hobbies, groups or sports
- keep a positive outlook and seek help if it’s getting hard.
Don't forget the bigger picture
Having a young family can be the best time of your life, but it’s also the busiest. It’s easy to become swept up in the blur of day-to-life and lose sight of bigger goals and life plans.
But it’s vital that you enjoy life and have some degree of normalcy. Save for a much needed holiday - and take time off to enjoy your family.
To get your lifestyle back you might have to plan and make compromises - personal, financial and lifestyle-related. But they grow up so fast - blink and you’ll miss it.