Financial planning tips for expecting couples

The first time you hear that you are going to be a parent, loads of emotions run through you mind all at once: happiness, excitement, anxiety and umpteen other emotions which are difficult to describe. After the initial euphoria, the truth sinks in that not only do you have to be emotionally prepared but you also have to be financially ready for the new addition in your life as you would like to provide the best for your child.

The first cost that generally pops up in everybody's mind is education of the child and at a later stage marriage. Although education and marriage form a very big chunk of expense, there are various other expenses and adjustments which a couple has to be prepared right from time they even start to think about planning a child.

Here is a list of expenses which starts right from the time you think of planning which every young couple has to bear in mind:

Doctors visit: The first expense be it at the planning stage or conception stage or post pregnancy.

Blood tests: Regular set of blood test needs to be done in your planning stage as well as throughout the pregnancy.

Medicines: There are certain sets of pre-natal vitamins which the female have to start right from the stage of planning and continue them along with few other medications throughout her pregnancy as well as till a certain time period post pregnancy.

The author is a certified financial planner. She can be reached at dhanplanner@rediffmail.com.

Sonography: As soon as you conceive, sonography is advised by the doctor and of course who would not like to see their bundle of joy even before she/he is born and be reassured from time to time about her/his vital signs and growth.

Hospital charges: Not all health insurances cover maternity expenses. So in case your maternity expenses are not covered by your health insurance then a big chunk of expenditure gets added to the list. Depending upon the hospital you select, your expenses will vary along with normal delivery or Cesarean-section delivery.

Alternative expenses: Today with couples planning late pregnancy, they many at times have to undergo treatment to assist with getting pregnant. It has been seen that one in three couples need to take treatment for conception.

Although the cost of treatment has definitely come down but it definitely adds up to your overall expenses. Also if your spouse decides to join pre-natal classes which are now becoming popular, it is definitely an expense. With the advancement in medical science Cord Blood Banking is picking up wherein the parents save the blood and stem cells from the umbilical cord along with umbilical cord. So in case a child suffers from certain diseases, this blood can be used in treatment of the child or sibling. The chances that it is useful to parents are 60 per cent and grandparents 30 to 40 per cent. So a definite hedge for your child's future.

Also, there is research going on in stem cell therapy which can be useful in the future. This banking cost anywhere between Rs 70,000 to Rs 75,000 for 21 years. Well one more addition to the cost and an important one.

Immediate expenses post pregnancy: In fact small expenses like those cute little baby clothes, cot, diapers, bottles, etc., add up to a substantial amount. Also in India, we have this concept of giving oil massage to the baby and so do not forget to add the cost of masseur.

Vaccinations: For your baby. One can never ever forget that.

Education cost: After the initial expenses as mentioned above are taken care of, you must start thinking about the education cost. Right from pre-schooling to primary, secondary education, to graduation and post graduation. Do not forget to add the education cost of various extra expenses such as of coaching classes and extra-curriculum classes' fees from time to time.

Marriage: Be it in limited amount or a lavish wedding, parents in India still contribute a sizeable chunk towards the marriage expense of their children. Marriages are an expensive affair. Hence, the planning for it right from the very start is very imperative.

Well besides the above expenses couples have to start planning for other changes and expenses in their life once the baby is delivered.

Life insurance: It must definitely be reviewed and changed once you have a child as the amount should not only cover the cost of living for future for your spouse and child but also cover her/his education as well as marriage cost. Hence, do take up your life insurance for review and change the amount accordingly.

Health insurance: Well not all health insurance covers maternity expenses. The ones that do either have a limit or cover expenses after certain number of years after taking the policy or has a co-payment clause. So for young couples please remember to check the maternity benefit availability while buying your health insurance along with other expenses covered. Also, once your little one is born, do not forget to take a medical insurance for him/her.

Cost of living: You will also have to make adjustments in your day to day expenses or in other words your budgeting has to be re-analyzed and changed.

Income changes: Many a times in a working couple, the mother gives up working once the baby is born. This would definitely affect the inflow of income. With increased expenses and one less earning member, a couple have to be well prepared for this change and start saving well in advance or look for alternative sources of income to help cope up.

Estate planning or Will planning: Although you might argue that it is too soon to be planning for a will but with the addition of your little one in your life, a couple has to plan for all eventualities. Be it disability or, god forbid, a case where both you and your spouse were to expire leaving behind your minor child.

You need to prepare a Will stating the legal guardians of your child until she/he attains maturity, a trustee to take care of your estate and complete all formalities. No one would want his or her child to be left in middle of an ugly legal custody or without anything. An important point to bear in mind.

I know the above list only reconfirms the fact that cost of living has gone up and raising a kid is becoming more and more difficult. No need to panic. Here is the point which has been emphasized time and again -- start planning at a young age. It is very important for the couples to sit down right soon after their marriage and put everything on paper and plan for it together.

Here is what young couples can do:

1. List of expenses: Along with making a budget for day-to-day expenses, based on the above factors which I have listed make a list of expenses and an approximate costing against it. Also need to decide when you would start planning for a baby so you have an idea as to when you require the funds. Also do not forget to add inflation to the cost. Deciding on the time frame you also have an idea as to which medium of saving to opt for.

2. Insurances: Besides having your life insurance in place, it is very important to start scouting for health insurances with maternity benefit. As mentioned above, there are not many health insurance companies that cover maternity expenses. So scout well and do check the expenses as covered by them. This is required to be done well in advance because just like the pre-existing disease clause which is covered after a certain number years after taking the policy, similarly maternity expenses get covered after certain number of years after taking out the policy.

So do not forget to check this. Many individuals in the service industry have maternity expenses covered by their company so check with your company in advance. Again to emphasize the point -- do not forget to review your life insurance cover and get yourself insured with a bigger cover which should not only cover the cost of living but also your child's education and marriage.

3. Savings for short-term expenses: Most couples plan a baby either after one year or at the maximum after three years post marriage. At this stage, it is more important to plan for the initial expenses as mentioned above. Once you have listed the expenses and have a fair idea as to the cost, do a systematic investment plan (SIP) in a good monthly income plan of mutual fund, which is a debt fund with a small portion in equity to give a boost of return. If you wish to invest lump sum amount then one more investment option is to invest in fixed deposit. Both the options offer liquidity and hence money can be redeemed easily.

4. Savings for long-term goals: This includes education and marriage of your child. As long as the education cost you are going to incur is at least more than 5 years away then you can start with a SIP in any good equity diversified fund. Also, start SIP in Gold ETF or buying small quantities, say 1 gram of physical gold, in the form of bars or coins. No matter if the current cost is high, buy small quantities. As and when possible buy more units or grams. The same concept of averaging will work over a long period of time and even before you realise you will have accumulated good quantity of gold. This gold will be very useful for her/his marriage.

5. Estate planning: As mentioned earlier do not forget this step at all. It is equally important and please do not think that nothing is going to happen to you. It is best to be prepared for all eventualities.

This article is not to scare anyone but in fact is aimed at preparing you guys so that when your bundle of joy comes in this world it is not a financial shock for you or a matter of worry but it's the best and the proudest moment of your life!