Welcoming a child into your marriage is one of the defining moments of your life as a married couple. And as sure as your bundle of joy is bound to enrich your lives in an unthinkable number of ways, the associated financial stress is going to be an inevitable caveat.
The financial stress associated with parenthood (especially early parenthood) isn't just a local phenomenon - it's a global one. A 2016 annual survey conducted by US based workplace wellness company Financial Finesse has estimated that 'between 26-36 per cent of working parents with minor children face high to overwhelming levels of financial stress' (that's nearly one in three).
Here are another few very interesting inferences from the same report: The leading cause of 'overwhelming' financial stress was inferred as 'not having one's financial situation under control' (81 per cent) followed by 'not being on track to achieve one's future goals' (60 per cent). Worries about the stock market or the economy paled in comparison, at a mere 26 per cent!
Overwhelming financial stress led to other destructive behaviours in many young parents; such as binge eating, drinking, substance abuse, smoking, anxiety, depression and missed days from work - all of which could potentially impair future earning potential and hence could exacerbate the financial problem. And so the wheels of life keep turning over and over!
Having read the above stated facts, I think you're quite clear by now that as a new parent, your two top priorities must be (in that order): getting your financial situation under control, and setting yourself up to meet your new family's future goals. Doing so will ease the financial pressure and get the wheels turning in the other direction.
Unfortunately, (for most), there's no easy way around getting your financial situation completely under control during this tumultuous time - you're likely saddled by more than one loan (car, home and what not), and also subject to high degrees of work pressure as you make the slow and steady climb up the corporate ladder.
Which is why my foremost advice to young parents is - fiscal consolidation. Make a few sacrifices and cut a few corners, in order to free up a monthly surplus. Commit this surplus to a long term, monthly SIP in an aggressive equity mutual fund, with the intention of using it only when your child turns 18. You'll be surprised to know that as little as Rs. 2,500 per month can go a very long way, if saved in a disciplined manner for many years. And yes, do step this amount up by 10 per cent a year.
Avoid debt like plague and don't fall prey to the 'lifestyle creep' at this stage of your life - you've got another life to support (and no guarantees for how long), so use every increments and bonuses wisely, spending 1/3rd of them for fun pursuits and lifestyle enhancements, and saving 2/3rd of it for your future goals (including your child's education and marriage, and possibly a 'setting up' fund to help ease them into their very own rat race when the time comes!)
You'll need to up your life and health cover at this stage too - although individual numbers will vary, it's safe to say that an additional cover of Rs. 1 to 1.5 Cr is in order, in order to cover for future expenses for your child, and the fulfilment of their important goals in case of an unfortunate eventuality. Don't forget to include your child in your existing health plan. A young family such as yours is advised to take up a family floater plan.
Although I'm not a huge fan if ULIP's - you could opt for one which has low inbuilt costs and a track record of performance. Or else - term plans combined with mutual funds work so much better. Just don't get stuck into one of those traditional child plans with poor returns and low surrender values - the only ones they benefit are the insurance company and your insurance agent!
In conclusion- as a new parent, you need to shift your perspective about money. Avoid getting yourself stuck into a rut that could potentially lead to unmanageable levels of financial stress - live below your means and save aggressively in high risk assets. Do not take on high levels of debt; pay off loans on priority and always keep your financial situation under control. And lastly, don't forget to have a financial plan prepared, keeping your new family member's future goals in mind.