Being a parent is a joyous, yet overwhelming journey. Parenthood comes with the responsibility of making a lot of decisions. And when it comes to money, new parents can make quite a few mistakes because you will be making these decisions for the first time.
Here is a list of some mistakes that new parents are most likely to make while planning their finances, and how you can correct them:
1. Failure To Plan
Not everything in life can be planned, and that is okay. However, you can reduce the stress of parenthood by having a plan in place, helping you think and decide clearly. Fortunately, it is never too late to start planning your finances.
Start simple with these 3 very important tips:
- Use an app to track your spending, and then divide it into “needs” and “wants.” This can give you a sense of guidance, helping you cut down expenses without the stress of wondering how.
- Keep aside a budget simply for unexpected events. Ideally, you should aim to have enough money in your bank account to pay for 3 to 6 months of basic necessities. For the average urban Indian, this could be anywhere between Rs. 1,00,000 to Rs. 3,00,000, depending on your lifestyle.
- Review your health insurance - it makes a huge difference in your ability to cover medical bills - your premiums will also be cheaper when you are young.
2. Emotional Overspending
You always want only the best for your little one. But while navigating the excitement of being a new parent, you may sometimes overspend on your baby, especially where it might not be needed.
As a new parent, you need to spend smart, and here are 3 tips to do so:
- Avoid buying too many clothes and shoes - babies outgrow them very soon, and your little one will soon need a new size.
- Try to wait before you buy too many things - your family and friends are likely to buy your baby some toys, teethers and more.
- Wait 30 days before buying something expensive but not “essential” - by the end of the 30 day wait, you can find alternatives that are more pocket-friendly.
3. Forgetting About Your Retirement
While planning your child’s future, you might forget your own. It is important to think of how you can save money and grow your wealth, so as to be financially independent once you retire.
Avoid pouring all your savings into the same fund. Apart from saving some money for emergencies, invest some money in reliable assets, which will give you returns by the time you retire.
4. Skipping Insurance
Most parents postpone buying an insurance plan. But car insurance, health insurance or life insurance, are all part of a money safety net that you should not ignore. So review your existing plans, or choose an insurance plan that fulfills your goals. HDFC Life Click 2 Protect 3 D Plus is a term insurance plan, which secures your family financially in the unfortunate event that you are not around. Giving them maximum cover for a minimal premium payment, it helps them to be financially independent and continue to follow their dreams.
As a new parent, make your financial decisions based on advice from the more experienced. We know it can be overwhelming to make so many decisions, which is why it is always good to have a plan in place. It will help guide your decisions to ensure that your family’s finances are safe and secure.