How much do you need to save for a ‘baby deposit’?

It's fairly straightforward to calculate a house deposit, but how much money do you need to save for a baby deposit?

Financial coach and trainer Manuela Andrysik crunched the numbers and worked out that your little bundle of joy can set you back up to $43,000.

That figure is calculated from conception to the baby's first birthday. It's based on average baby costs, and takes into account lost earnings, tax benefits and the government's current paid parental leave scheme.

The biggest financial hit comes from lost income. Assuming you're on average income, you receive the Federal government paid parental leave (or equivalent from your employer*), and you take the average 32 weeks maternity leave before returning part time for 20 weeks in the same financial year, your net income loss will be approximately $30,000.

The other expenses calculated in the baby deposit figure include pregnancy and birthing costs, childcare, equipment and consumables such as cot, pram, car seat, nappies, and feeding costs, and additional living expenses such as clothes, transport, recreation, health and utilities.

There's a huge difference between how much we think babies need and how much parents spend on them. The more people earn the more money they tend to spend on their babies, with low income families spending $4,700 compared with high income earners outlaying $12,600.

How much extra does it cost to have a baby in a private hospital?

After paying private health insurance premiums for obstetrics for years, it can come as a shock to discover that if you actually use your private health cover you end up paying much more than your uninsured sisters.

According to NIB's The Costs of Having a Baby report, the out-of-pocket cost of having a baby in the private system is between $2,445 and $8,355. Yes, that's after your get your Medicare and private health insurance rebates.

By contrast, having a baby in a public hospital can cost nothing. You do however have less choice in a public hospital, most likely being unable to choose your obstetrician, or a planned caesarean delivery. You'll also probably have to share a room.

Cloth nappies vs disposable nappies

As with any baby product, the price of disposable nappies varies enormously. You can spend anywhere from $500 to $2,000 in a year on nappies depending on nappy brand, package size and where you buy them.

Cloth nappies have a higher initial outlay than disposables and they have ongoing laundering costs. But, according to Choice, they are cheaper in the long run.

Breastfeeding vs formula feeding

Breastfeeding can be pretty cheap if everything works like it's supposed to and you are physically present for every single feed of your baby's life.

But if you're one of the significant number of women who experience difficulties breastfeeding, it's far from free.

At the very minimum you need special bras and breast pads. And then you may also need a breast pump, bottles, special milk freezer bags or trays, lactation classes or a specialist lactation consultant, nipple shields, nipple gel, nipple gel pads, antibiotics and laser treatments for mastitis and breast lumps, and medication and a special diet to increase milk supply. The costs can end up in the hundreds, if not thousands of dollars.

Formula-fed babies will need bottles, sterilising equipment and the formula. This can range from $800 to $1,600 over the year.

Financial coach Manuela Andrysik says that new parents need to prepare their finances well before the baby arrives — when you're still working and you're not stressed and sleep deprived.

"Parents-to-be should clear as much of their debt as possible, review their spending and boost their savings while they have more income and before the additional baby expenses. They should talk to the relevant government department and their employer about their obligations and entitlements," Andrysik says.

"The last thing new parents want to worry about, or deal with, when they're holding their precious newborn in their arms is money."

 

* Currently women are able to extend their paid maternity leave by accessing the Federal Government's paid parental leave scheme and their employer's maternity leave payments. This may change for babies born after July 1 2016.

This article was originally published on Essential Baby on 17 November 2015. 
This article represents the views of the author only and does not necessarily reflect the views of AMP. 

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© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.