Being a parent brings huge amounts of joy to your life – but it can also be a very expensive experience. It’s estimated that raising a child from birth to age 18 could cost around $300,000. In recent years, the cost of essentials has been rising steadily, and it’s likely the cost of having a family will keep rising, too.
Here are a few things that might help you get a handle on your money, so you can focus on enjoying life with your kids rather than fretting about finances. First, what factors go into the cost of having a child?
The real costs of raising a child in New Zealand
Every family is different, and how people choose to spend their money varies. But there are some expenses that are typical for most people.
At the baby stage, you may need to pay for nappies, a stroller, clothing and formula if you’re not full-time breastfeeding. (If you are, you might need more money in your budget for snacks for Mum!) You may also need to budget for childcare. The cost of this can vary significantly depending on the type of care you receive and the support you qualify for. The average cost is estimated at about $60 per day.
When your kids reach school age, you may not have to pay fees if they attend public school, but you may encounter additional fees for after-school activities and sports. Throw in clothes, toys, family trips and food for the next almost two decades, and it’s not hard to see how the cost adds up.
There is support available
Depending on your household income, you may be eligible for government support to help cover some costs of raising a family.
Working for Families
These paid tax credits increase with the number of children you have, but decrease with higher household income. A family with two children can receive some level of support until they earn just over $110,000 in pre-tax income.
Best Start
Best Start provides $73 per week in payments to parents of children aged up to three, subject to income tests. The amount paid begins to abate when a household earns more than $79,000 and ends at $97,000.
FamilyBoost
Helps cover childcare costs. Eligible families can claim 40 percent of the cost of their children’s childcare, or up to $1,560 every three months. Households earning up to $229,100 a year can claim this credit.
Getting family finances sorted
If you’d like to get your family finances under control, there are a few steps you can take.
Step 1: Review your financial Picture
Reassess your situation: Your financial situation may have changed since your children arrived. Your household income might have dropped if one of you is staying home or working fewer hours. You may incur additional childcare costs if you’re working. Stepping back to gain a clear overall view of the new situation is a great first step.
Understand your current debt load: This is an expensive time, and it makes sense that you might be carrying a little more debt than is typical. Take stock of the situation – what do you owe on credit cards and personal loans? Are you coping with your mortgage? If any debt feels as though it might become problematic, it’s important to take action sooner rather than later. That might involve talking to your lender about your options, or maybe considering debt consolidation or refinancing. If you have questions about your personal loan options, the better finance™ team can help.
Check your credit score and cash flow: It’s a good idea to check in on your credit score and ensure there are no surprises or inaccuracies in your record. Consider your income and outgoings to determine your free cash flow each fortnight or month, and how it should be allocated. When you have kids, it can be especially useful to have an emergency fund because you may have less capacity to cope with financial shocks.
Use a budgeting tool or app to gain clarity: There are many options available online to help you plan your household budget and set goals. Sorted has a budget planner and better finance™ has loan calculators that can help you weigh up your options.
Step 2: Prioritise essential spending vs. “nice-to-have”
If your budget has been pared back, it may be helpful towork out what spending is going on needs and what is being spent on luxuries.
There may be ways to cut back without compromising quality. There are many online retailers selling secondhand baby gear, and many parts of New Zealand also have physical outlets and op shops. Toy libraries can be a good option. If you have the time, you may find that items such as cloth nappies can be cost-effective.
When preparing your budget, you can categorise your spending into essentials, luxuries, debt repayment, and savings.
Step 3: Smart debt management for new parents
You might want to focus on paying down your debt to reduce your outgoings.
A good first step could be to run a debt stocktake, listing the debts you have and the interest rates you’re paying on each. That might help guide you on what to focus on first if you have money to devote to debt repayment.
In some cases, you may want to consider debt consolidation. This can be a useful option if you’re finding the juggle of managing multiple payments stressful, or you want to consolidate your debt into one loan. We can help you look at how this could work.
When you’re busy with family life, it can be easy to miss things. Setting up automatic payments for all your important commitments may be a big help.
If you need to chat, the Money Talks service offers confidential advice, and there are budgeting services around the country with mentors who can help you check that you’re getting all the support you’re entitled to.
Step 4: Build a baby-friendly budget
Create a budget that works for you. No family is the same as the next, and your budget should reflect how you want to live your life. These suggestions may help:
The 50/30/20 rule
Using this rule, you’d decide that 50 percent of your money will go to needs, 30 percent to wants and 20 percent to debt and savings. You might adjust this slightly based on your financial situation, but it provides a useful framework.
Set up funds for predictable costs
When you know a bill is coming, setting money aside early can help. You could set up a savings account for expenses such as birthdays, school fees, and planned family trips. Small weekly savings can add up.
Meal planning and bulk buying
Planning out your meals and shopping from a list can save money. Some people also favour shopping online. Not only is it easier with kids, but it can also reduce the chance of impulse purchases. If you have storage space, buying in bulk can save you money.
Check your subscriptions
Many parents are short on time - are you really making use of all your subscriptions? Cutting anything you’re not using could free up some cash.
Step 5: Plan for the future
Take some steps now to help your family stay on track into the future, too.
Start (or continue) an emergency fund. Even if you’re only making small contributions, having an emergency fund is extra important when you have kids. While a single person might be able to get through a financial hiccup by staying with a friend, for example, that’s not as much of an option for someone with a family.
Consider your insurance protection. When others depend on your income, it may be more important to protect it. What cover do you have in place, and what might be useful to add?
Setting up KiwiSaver: If one adult in your household is out of the workforce for a while, you might consider how you could keep their KiwiSaver account ticking over. Some people choose to make the minimum required contribution to receive the full government credit. If you choose to make payments from your paid parental leave, the government will also make a matching employer contribution. You could also consider whether it’s appropriate to start an account for your kids.
Savings accounts for children: A savings account can be a good way to teach kids about money by helping them put aside a small amount on a regular basis. Once they have a larger balance, they could transfer the funds to an investment account or KiwiSaver, if appropriate.
Common mistakes new parents make with money
Watch out for a few of these mistakes new parents might make.
Overusing BNPL or credit cards for baby purchases
With a lot of baby shopping to be done, it may be tempting to use buy-now-pay-later services or credit cards to cover the cost. But take care not to spend more than you intended to.
Ignoring debt while focusing only on child costs
Stay on top of your debt repayments. Falling behind can damage your credit record and incur additional interest and fees.
Not adjusting lifestyle expectations post-baby
If your income level has changed, your spending patterns may need to as well.
Forgetting to update wills, insurance, and financial plans
Whenever your circumstances change, it’s important to update your insurance, wills and financial plans. If you’ve recently become a parent, now is a great time to check that they remain suitable.
Practical money-saving hacks for Kiwi parents
Here are some quick money-saving tips.
Make use of the resources available to you: toy libraries offer variety; parenting groups can connect you with cheap or free activities and entertainment; and organisations such as Plunket can often help with discounts. You may also be able to set up informal money-saving practices such as childcare swaps and coffee groups.
Leveraging loyalty programmes and supermarket hacks: Managing your loyalty programmes to maximise discounts could pay off. Petrol and supermarket discounts can be useful, and credit card rewards can offer benefits - but the benefits may not make up for the costs if you’re not paying the balance off in full each month.
Buying bulk nappies and formula online: If you have storage space, buying in bulk can be a money saver.
Free entertainment options for families in NZ: There are lots of free things for families to do around the country. Whether it’s outdoor activities or museums and art galleries, check out the options in your area.
Frequently Asked Questions (FAQs)
How much should I budget monthly for a new baby in NZ?
This largely depends on your income. You’ll need to ensure you have enough for the basics, such as nappies and clothes, but you may be able to get some essentials cheaply or even for free if your budget is tight. That may allow you to spend more on a couple of key items.
Should I pay off debt before starting an emergency fund?
It may be a good idea to do both simultaneously. When you have young children, the resilience an emergency fund provides is important. But don’t fall behind on your debt repayments, as it could damage your credit record.
Can I still qualify for a loan as a new parent?
Yes – as long as you have the means to repay a loan and meet a lender’s criteria, you should be able to qualify. A lender will include your financial obligations for your children in its assessment.
What financial assistance does the NZ government offer new parents?
There are a number of supports available, depending on your household income and circumstances. Information is available on the Ministry of Social Development and Inland Revenue websites, or you can contact a financial mentor for advice.
How do I start saving for my child’s future education?
The earlier you start, the better. You might choose to save in a savings account or invest in a managed fund if it's appropriate.
Being a parent is a wonderfully fulfilling experience. By staying on top of your finances, you’ll maximise your opportunities to relax and enjoy your family. If you have any questions about personal loans or debt management, contact the team at better finance™. We’re here to help.
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