As any parent will tell you children bring enormous joy AND BILLS. You will need to feed, care, dress and educate them for two decades. The financial needs of young parents in Ireland are simply enormous. So how do you prepare your finances for a baby?
Prior to babies, many couples sail happily along living from payday to payday. Having a family and taking on the financial responsibilities associated with children should bring an abrupt pause to frivolous spending. However, there is light at the end of the child rearing tunnel and this article should support you in preparing for this huge change.
9 Points to note to make sure you are always looking to the future
1. Pay off expensive personal loans and credit card debt – do this before you start saving as it costs more to borrow than you can hope to earn from low-risk investments.
2. Have an emergency fund – this is different depending on your employment status. Some employers have very generous sick pay policies while those that are self-employed do not enjoy the same luxury.
3. Have short term savings for holidays and Christmas – avoid unnecessary borrowing for events like Christmas, birthdays etc.
4. Look at income protection in case you are unable to work for any reason – if you have a young family obtain this before you get life cover.
5. The next step especially when you have a young family is to take out life insurance.
6. Start a pension plan as early as possible.
7. Plan for future education fees – university fees etc. You may wish to open a joint account with your spouse and start saving by a monthly direct debit from your current account, even a small amount of money every month will help.
8. Ensure your tax affairs are in order.
9. Make a will.
It is necessary for you and your partner to review the basics first
We all work for money but what’s really important is that our money is working for us.
This means ensuring you prepare a household budget – get some tips here in my Preparing a household budget post.
It is important you contact your local social welfare office and apply for maternity leave, paternity and children’s allowance. If you worked in Europe before having your baby and are now returning to Ireland to have your child, you should still be entitled to maternity pay in Ireland. You should ensure you include the details of the dates you worked overseas on the maternity benefit application form. Once you know how much you will be earning it is important to start saving. It is useful to have two to three months income put aside for emergencies before the baby arrives, even if you only save a small amount each week while you are pregnant the habit of saving is more important than the amount saved. 
After the baby arrives, I am often asked by couples if it is even worthwhile for one spouse to return to work given the cost of childcare. This is an important question that must be addressed by reviewing the income and tax situation of both spouses and the additional costs associated with one spouse returning to work such as looking at travel and childcare costs. If you do chose to stay at home and not return to employment, be it stay at home as a stay at home mother or a stay at home father, but you are concerned about your entitlement to a state pension when you eventually come to pension age, you should review your current PRSI record and also read more about the homemakers scheme.
Tax Credits
After having a child, bear in mind the home carers tax credit of €1,500 (current amount in 2019) which you are entitled to if you have income under €7,200 and you are entitled to a portion of this tax credit if your income is under €10,200 in a tax year. Also the increased tax bracket amount of €26,300 or the lower of the lower income earner is available. This means a greater amount of income can be taxed at the lower 20% rate. This sharing of the tax bracket is only available if you are jointly assessed for tax purposes with your husband/wife. Have you notified Revenue of your date of marriage? Did you fill in and submit an assessable spouse form, if not it is essential you do this now.
Tax Relief
Many women opt to take unpaid leave after their 6 months of maternity leave and so can be due a tax refund depending on their income levels and the time of the year when they returned to work. Also, small babies bring big medical expenses, ensure you are claiming tax relief for medical expenses, even if these are the medical expenses of your child. If your child is diabetic or is coeliac additional tax relief can also be claimed. Make sure you read my articles on How do I claim an income tax refund? Have you applied for the home carers tax credit? Many people assume Revenue know you have had children or will apply for tax credits on your behalf, they won’t and you do need to either apply for these yourself or engage an accountant to this for you.
Conclusion
We all have the same basic needs; to secure our families future regardless of what happens. Don’t be shy about asking for help, we will all need help at different times of our life, it may be time to speak to the experts regarding securing your families’ finances. For further information please email caroline@charlespcrowley.com