Having a family

Know what to expect before you’re expecting

4 min read

Before my husband and I started trying for a baby we had several conversations about how a miniature human was going to change our lives. We talked about the sleepless nights, juggling work and childcare, even who was going to do the pooey nappies – but very rarely did we discuss the mammoth change it was going to have on our finances. I think partially we didn’t understand the different channels we’d be losing our money to, and partially we were so in love with the idea of extending our family that we were in a “baby first, worry about finances later” state of mind.

In hindsight, I wish we’d spent some time understanding what the expenses would be (beyond nappies and clothes) and planning for those expenses while we were both working, and not under pressure from a due date.

Parental Leave

I had no idea what I would actually be entitled to when I finally went on parental leave. Turns out there could be a few avenues of income depending on who you work for, and your financial situation. The sooner you understand what your entitlements are, the better able you are to budget for taking time off work.

Paid parental leave (PPL) is a government-funded entitlement paid to eligible mothers and other primary carers. These payments go towards the loss of income when they take parental leave or stop working to care for a new-born, and they cover the first 18 weeks of a baby’s life.

The IRD website has the most up to date PPL payment information, but as of August 2017 PPL payments equal your normal pay up to a current maximum of $538.55 a week before tax. You'll receive the average of your highest 26 of the last 52 weeks of earnings up to the date the child arrives in your care.

Many NZ employers also offer top-up payments to support eligible employees when a baby is born. Often the top-up payment is the difference between the employee’s ordinary salary and the Government PPL.

Example: Annual Salary / 52.14 = Ordinary Weekly Salary - Government Paid PL = Weekly top up x 18

Whatever your entitlements, it’s important to have a clear understanding of how much and for how long so you can better plan today for a drop in income tomorrow.

Tip: As of 1 June 2017, a new law means parents who want to get parental leave payments can choose to first use other types of paid leave they’re entitled to, e.g. annual leave, alternative days, special leave, time off in lieu. Parents can choose to start their 18-week parental leave payment period once they have taken other types of paid leave — even if this is after the child’s arrival. Previously the parental leave payment period couldn’t start later than the child’s arrival.

To work or not to work

Childcare costs in New Zealand are among the highest in the developed world, with many kiwi couples spending a third of their income on childcare. So it’s something to give serious consideration to before you get pregnant. You don’t need to know right now if or when you’ll return to work, but now is a good time to chat with your partner or friends about how much you’ll realistically be shelling out each week should you decide to place your child into a day care, kindergarten, pre-school etc.

Some indicative costs are below:

  • a nanny can cost between $16-$20 per hour on average in the bigger cities, and if sourced via an agency there may be an agency fee on top.
  • sharing a nanny will cost less per family per hour, as the cost is shared.
  • long daycare (childcare centre) fees vary, but range between $5-$7 per hour. Generally childcare centres will charge either a day, or half day rate.
  • home based care costs from $5-$8 per hour, depending on where you live and the service offered.

For some parents, the cost of childcare outweighs the financial gain of returning to work, for others the need for adult conversation and the other perks associated with work (pension, health insurance, company car) overshadow the cost of childcare. Whichever it might be for you, it’s worth having an idea of which way you might head so it’s not an unexpected expense when the time comes.

Start an emergency fund

If you don’t already have a ‘rainy day fund’, now’s the time to anticipate some emergencies. Kids are accident prone, and with the cost of raising a child there’s no telling if you’ll have the disposable income to pay for any unexpected expenses. Having at least three months’ worth of living expenses covered is a great place to start.

Tip: BNZ has a great range of savings accounts for casual, serious and pro savers. You can track your progress and stay motivated with inspiring images of what you’re saving towards.
Take our quiz to find out what kind of saver you are, and for more details on emergency funds read our article here.