Moving from a double-income-no-kid family to a single-income-single-kid family is not easy money-wise—may affect the overall family finances
Ashwini Kumar Sharma asks experts how an expectant mother, her family should prepare to cope with a financial shortfall in case the mother plans a sabbatical
When you become a mother, many things change for you. With the newborn becoming the centre of your universe, you may need to readjust your lifestyle in many ways, not just emotionally and physically but also financially. A lot of you may choose to take a sabbatical after your child is born. But moving from a double-income-no-kid family to a single-income-single-kid family is not easy money-wise—it may affect the overall family finances and also take a toll on your personal expenses. Ashwini Kumar Sharma asks experts how an expectant mother and her family should prepare to cope with a financial shortfall in case the mother decides to take a break from her job.
Lovaii Navlakhi, Managing director and chief executive officer, International Money Matters
Keep amount for childbirth expenses in a liquid fund
It’s a magical moment when the woman graduates to be a “mother-to-be". During these times, having a grip on your finances can give a sense of calm. There are one-time expenses like doctor’s fees, nutritional costs, medical emergencies and the delivery itself to take care of during this period. Keep this amount partly in a liquid fund and partly in a bank.
Make sure the earning spouse’s savings continue to be invested in the SIPs you started for long-term goals. Most organisations provide the statutory maternity leave, but once you have a baby, your plans to resume work soon after this period can be stymied. If you have your finances in order, there’s a good chance that you will ensure that you start preparing for your child’s future soon after her birth. That will be your Mother’s Day gift to your child.
Rohit Shah, Founder and chief executive officer, GettingYouRich
As income drops, create an additional corpus
The family needs to revisit its financial plan and realign income, expenses, insurance and goals. The financial corpus needed for a child, including schooling, graduation, higher studies and marriage can easily be in crores. If the mother needs to take a sabbatical, goal-based savings would suffer in the interim period; assess the impact.
Once the baby joins the family, existing health insurance covers, both personal and employer’s, would need to include the child.
Since the spends rise and income drops simultaneously, an additional corpus can be very helpful. This can also take care of the mother’s personal expenses in case she quits work.
While proactive planning can help create a corpus, a prudent spending approach may be required in line with the family’s financial status.
It is important to accumulate a large enough corpus to take care of expenses during and after pregnancy. One of the options is to a buy a maternity insurance, which is usually provided as as add-on or rider on a health policy. But the premium for maternity insurance is higher on account of almost 100% claims ratio, so you should save instead of buying a policy.
It is common to see a lot of money being spent on clothes, toys and birthdays. This money, if kept aside, can be utilized in a more meaningful manner.
Besides, initiating a disciplined investment process in mutual funds much before the child is born can go a long way in building the corpus required to cover child-related expenses as well as reduce the financial burden caused by a family going from DINK to SISK.
Varun Girilal, Co-founder and executive director, Mitraz Investment Advisors
Avoid child endowment plans, opt for term insurance
Given that the family is moving to single income, there is a case to make one’s portfolio safer till the mother gets back to earning. Medical insurance plans, especially corporate mediclaims cover a good part of delivery costs but tend to have low limits for any pre- and post-maternity expenses.
Follow up with your insurer to update your newborn as a beneficiary and update your Will. Increasing the life cover of both parents is suggested through term insurance. Avoid child endowment plans which tend to be hard-sold on an emotional plank as they have heavy hidden charges and long lock-in periods.
Have an allocation plan and clear accounting for the gifts received. A family misunderstanding can happen if money given as gift is not invested based on the common understanding of both parents.