Tag Archives children

Having a baby: financial lessons I’ve learned


Eight weeks ago, I gave birth. As a first-time mum, to say it’s been a steep learning curve would be an understatement. I’ve learned a lot in that short time, from the basics of feeding and settling all the way to what a healthy poo looks like.

I’m also finding out how parenthood impacts one’s finances. While I’m only at the very beginning of my journey, here’s what I’ve found so far.

 

Nappies cost a bomb

In case you didn’t already know, babies wee and poop a lot. Mine is no exception. Sometimes I change upwards of ten nappies a day. With disposable nappies costing around $40 for a box of 108 the costs quickly add up.

Cloth nappies are typically a more affordable alternative in the long run. There is a large initial outlay but after that the only costs are for cleaning products, electricity and water.

Cloth nappies are also generally kinder to the environment. While the water and energy used to clean cloth nappies still take their toll, cloth nappies are thought to be less detrimental than disposables. One disposable nappy takes 200-500 years to disintegrate and the Union of Concerned Scientists has estimated that an alarming 18 billion diapers are thrown into landfills every year*. Cloth nappies, being cloth, are biodegradable.

But as with anything, there are cons as well as pros. The downside to cloth nappies is that they need to be washed. Continually. From a practical point of view, a time-poor new mother may not have time for all the extra washing.

Unfortunately for both my pocket and the environment, I find myself in this camp. It was a decision I grappled with, but the convenience of disposable nappies wins.

You pay taxes, so accept Government assistance

It’s no secret that dealing with Centrelink is a nightmare. Long queues, seemingly endless call times and confusing processes are all part of the experience. But for many new parents a little financial help from the Government will be worth the pain.

Centrelink offers some new parents financial assistance to help with the cost of raising children. Depending on their situation, new parents could be entitled to payments like the Family Tax Benefit, Parental Leave Pay, Newborn Upfront Payment and Child Care Benefit. You will be means tested when you apply, meaning that your household’s income and assets will be taken into account to determine your eligibility for payment.

The ‘Families’ section of the Department of Human Services website houses information on these payments, as well as a payment estimator which will give you a rough estimate of what you may be entitled to. I also found this article on the BabyCentre website to be useful: www.babycenter.com.au/a562850/government-benefits-for-families

Don’t overspend on things you won’t use

The final lesson I’ve learned is not to go overboard buying clothes, toys and gadgets for baby before she arrives. This takes self control – it’s easy to get caught up buying those adorable little outfits. I admit I went crazy. At the time, I didn’t realise I would receive so many lovely gifts from my gorgeous family and friends. The result is a wardrobe bigger than my own. This is a picture of what I bought on just one shopping trip early on in my pregnancy. Naughty!

baby clothes

Unfortunately my little one has already outgrown many of her clothes. Hopefully we can give her a little sister one day so that some of the items get decent wear out of them!

 

 

 

* http://abcnews.go.com/Technology/story?id=789465&page=1

Teach your kids the value of money

Bill Murray, the actor, once said “the best way to teach kids about taxes is to eat 30% of their ice cream”. A tad harsh, but he kind of has a point.

All parents want their children’s lives to be as easy as possible, but there’s only so long that most can support the financial needs of their children and the time to cut the purse strings will eventually come. If we haven’t taught our kids by that stage how the real world works then they could be in for a very rude shock.

This is why I believe it is so important to instil financial values in children from an early age until they become adults in their own right. When the time comes for them to stand on their own two feet they will be well equipped to transition into a life of independence.

The best way to teach kids about taxes is to eat 30% of their ice cream.

I happen to be lucky enough to have some very financially savvy friends who are also ace parents, and who were more than happy to share their tips on how they taught their children the value of money. A collection of the best is below. Taxing ice cream wasn’t among them, but there are still plenty of other great ideas in this lot.

Tips for pre-schoolers

The general consensus among the people I spoke to was that it is never too young to start and that this a good age to introduce the concept of money and exchange for goods and services.

  • Start off by playing a game to identify different notes and coins. Recognising each piece of tender is the easy part, understanding what it is worth is more difficult. Australian coins are not like some other countries’, that get bigger the more they are worth. Nope, that would be too easy. In Australia, a two dollar coin is smaller than a twenty cent piece. That must be very confusing for a young mind. This is where playing shop can help.
  • Playing shop keeper will introduce the notion of exchanging money for goods and services, and how different coins and notes will buy you different things. Use the more valuable notes to pretend to purchase bigger items, and the smaller coins for smaller purchases.
  • Another great tip is to give your child the task of handing money to the cashier and accepting the change when you are at the shops. This will not only reinforce the concept of exchange but will also make them feel super important!

Tips for school age

This is a good age to introduce the concepts of earning, saving, spending, philanthropy and opportunity cost.

  • Once your little one gets the idea of money and exchange it could be time to start introducing pocket money. There’s no hard and fast rule when to do this, just make sure they’ve got a grip on the concepts mentioned earlier. First up, how much to give them? This is entirely up to you, but work within your means and your budget. I know one family who gives their nine year old $7 per week (a dollar a day) and another who gives theirs $20. There’s no right or wrong amount. Next, think about whether they will earn this money or it will be given to them. Working for chores can open up debate about the value of different tasks – some families would simply rather avoid any arguments. But if you do decide your kids should earn their pocket money, some good task suggestions are raking up leaves, cleaning the car, keeping their room tidy and helping with the washing up. You could also incentivise with a bonus if your child performs a task really well. Different families do different things … just do whatever works best for yours.
  • Teach your child about making a choice between spending and saving. To save for something they really want, help them set a savings goal. Help them distinguish spontaneous purchases from things they need. This introduces the concept of opportunity cost. Once your child has got the hang of it, think about making the frequency of their pocket money payment fortnightly then monthly to help them learn to budget and make their money last the period.
  • Define what the pocket money should cover. For example, if your child receives pocket money of $10 a week, they might want $5 for spending money, $4 to go automatically into savings and $1 to a charity. This is a great time to introduce philanthropic giving to youngsters, so that they understand they can help people less fortunate than themselves.
  • The appropriateness of school banking programs like Commonwealth Bank’s Dollarmites program is debatable. Underneath it all, these programs are marketing ploys for the banks but they can help with children’s financial literacy. If your school does not participate in a school banking program, take them to the bank and open an account for them.
  • Board games like the Game of Life and Monopoly are awesome for teaching kids about making and losing money. Card games can even show them the consequences of gambling.

Teenagers:

Introduce the more complex concepts of borrowing, lending, taxation and superannuation once your kids enter their teens.

  • If your teen’s money runs out, try not to just give it to them. This is easier said than done, I know, but it is important to stand firm so they don’t look at you as though you are a perpetual money tree. If you can withstand all the whining when their money runs out, they may start thinking about ways to earn it themselves. I know one very enterprising teen who wanted more pocket money than his parents would give him, so he set up a neighbourhood a car washing business. He handed out some flyers in his cul de sac, which led to one client who he charged 5 dollars. He did a great job, and before he knew it through word of mouth,  three other neighbours others wanted the service.
  • And what about starting work? I would say it’s best to do this as early as possible. I’m going from my own personal experience here. My parents actually discouraged me from working as a teen because they felt it would be a distraction from my studies. This meant I was an adult before I had my first job. When I finally entered the workforce years behind my peers I found I had missed out on crucial learnings; I really had no idea how taxes worked or what superannuation was. And this had a real effect on my confidence. I would therefore recommend encouraging your child to find a part-time job whilst studying, whether it be in retail or at a fast food chain, just to get them used to working. The age you can start work depends on which state or territory you’re in. Visit the Fairwork Ombudsman website for more information.
  • Credit cards open up a new world of financial freedom for teens. It’s really important that you help them understand what credit means and how it can help to build a solid financial history, and also why it’s crucial to pay off your purchases. Help them manage their repayments by setting up a budget and a repayment reminder schedule.

When it comes to teaching kids about money there’s a world of ideas out there. Talk to other parents to see what they’re doing and surf the net. You will also find more great information on ASIC’s website www.moneysmart.gov.au

 

 

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