NAVIGATING PARENTHOOD WITH 5 FINANCIAL PRINCIPLES

Being a first-time parent can be daunting experience. You’re never fully prepared for what’s coming, and it always feels like there’s something new to learn every day. It doesn’t help that well-meaning yet interfering relatives keep nosing in with their do’s and don’ts. The sheer amount of information online can also seem overwhelming and don’t get us started on celebrity parents who seem to have it all under control with their carefully curated Instagram posts, making us feel like we’re failing parenthood!

Amidst the excitement of welcoming a newborn, one issue that rarely gets talked about is financial management as a new parent. The physical needs of a child are often well-met, but what about their financial needs? What are some sound financial principles a new parent should follow for the benefit of their child’s future?

When it comes to building and growing a family in Malaysia, monetary challenges from unplanned events can put first-time parents in a tight spot. In addition,  with the rising cost of living and stagnation of income, it’s even more important for parents to be financially adept and savvy in money matters. Here are six sound principles of financial management for the first-time parent. 

Research online and ask other parents about financial or monetary schemes that reward the birth of a child, or financial benefits that help parents to start saving and investing for their child. One such program is the Amanah Dana Anak Malaysia 2050 or ADAM50, which rewards all newborn babies from January 1, 2018 to December 31, 2022 with RM200 worth of unit trust incentive.

Some states also offer a one-off monetary benefit, like the Selangor Children Heritage Fund (TAWAS) that offers a one-off payment of RM1,500 when your child reaches the age of 18. Others that are available include Program Anak Emas Pulau Pinang in Penang, and Skim Insentif Kelahiran Anak in Kedah. Selangor is one of the states that provides financial aid for a child up to 6 years of age through siKEMBAR and TUNAS, which provide a monthly allowance through a child’s nursery or pre-school. 

Do you really need the pair of designer baby sneakers? Will your newborn be able to differentiate between a thousand-thread count blanket and a regular blanket? Does the baby’s nursery really need an aromatherapy air diffuser? The global baby product market is valued in the billions, and is expected to grow each year. Make sound financial decisions by identifying early on what are needs and what are wants.

One area where most parents could be spending too much money are infant clothes which are quickly outgrown. For items that will be quickly outgrown, it makes better sense to look for hand-me-downs (properly cleaned) or ask as gifts from friends and family (who are very likely to splurge on something that looks cute for their nephew or niece). 

That being said, there are essentials for your child that you should not be skimping on, such as a baby car seat, a cot, a stroller, and milk bottles. These are items that your child will be using on an almost-daily basis throughout the first year of their life and beyond, and will provide excellent return per Ringgit spent. Look for quality in the products within this category. Baby expos are a venue where most of the good brands show off their wares, and you may even snag a deal or two here. 

Another financially sound principle that new parents should adopt is to start saving for the child’s future early. The cost of raising a child increases as the child grows older, and so does the returns of compounding interest. We have written previously on the different methods to finance a child’s education, but having a long-term savings plan is one of the most reliable ways to secure their financial security. Look at education savings plans such as the SSPN, or an investment-linked plan like A-Life Joy that also provides life insurance coverage. Educational insurance plans like the A-Plus ScholarSaver additionally qualifies you for a personal tax relief of up to RM3,000. 

A child’s medical needs can be just as costly as that of an adult. While most new parents are mostly concerned with the everyday costs, be sure to plan for the unexpected, too. With a medical insurance plan, your child will have access to quality healthcare when they need it, plus you’ll have the peace of mind that the cost of treatment or medication is taken care of. Look for a medical insurance plan that’s comprehensive and flexible enough to include your spouse and children under the same plan, like the A-Life Med Regular.

Read more about why you should consider medical insurance for your child here.

As a new parent, it’s natural for us to want the best for your child. Ensure that you do not neglect adopting these financial management principles in their growing years, and take advantage of the time you have to develop a financially secure future for your child.